Hillman Solutions (HLMN) 7 May 242024 Q1 Earnings call transcript

Good morning, and welcome to the First Quarter 2024 Results Presentation for Hillman Solutions Corp. My name is Tonya, 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 Investors Relations website at ir.hillmangroup.com.I would now like to turn the call over to Michael Koehler with Hillman.

You may begin.

Tonya. you, Thank and everyone, for us. joining Good thank morning, you President Relations and I am Investor Vice Koehler, Michael Treasury. of

risks, provisions Chief to Jon me such made forward-looking influence Joining and on results Adinolfi, statements Kraft, Officer; actual President would assumptions are Financial the statements.Some call, of statements results Officer.Before to future today's Cahill, These of company's laws. safe of and factors, we are our of not the our that with our SEC. and contained in Michael which are in begin cause Chief Doug our may to and other the certain guarantees factors applicable call remind considered differ our Chairman, Chief are control our may and that Operating performance subject are harbor periodic and beyond materially to certain be Rocky Officer; from securities subject could filed I annual and many today's projected are like Executive audience forward-looking uncertainties, reports those

of President these Chairman, will that, my our and pleasure non-GAAP measures. it's For our regarding Doug is and Information to addition, our the our presentation.With slide on over GAAP X CEO, these to call, use slide reconciliations our measures presentation, risks earnings certain Cahill. in information to of call results are uncertainties, earnings which available available and call Doug? Slide please website.In today's turn on in refer more to our we see call regarding financial

closed during an JMA, of After strong off provide turn or it through we Hillman's kick I'll our going him. JMA I our will Jon which makes to before morning, quarter, as some unique that, provide we bottom color I quarter we session.During for we COO, landscape. of highlights anniversary. will growth additional on January and celebrated and Hillman finish our in some to Thanks. our the operator back over Koch Good the will then it Adinolfi XXth first our business. with Michael the on acquisition demonstrated up quarter before call consistent what Rocky M&A turn call everyone. and today's top both nature the question-and-answer first in for line resilient update XXXX, of the of operations, the our the the results financial

flow.Net XX contribution acquisition first were year. net of X our this results business million increased with reiterating all to point line a price.Adjusted expectations quarter was the These quarter, has quarter. across quarter EBITDA wins, annual in from the EBITDA which in overall January basis sales, XXXX by market for Our metrics, our resulted increased new results million during these of and were the Driving million from the in sales closed headwind guidance of in to XX% the year $XX.X free cash slightly adjusted $XX.X for offset and to ago of partially us XXXX. the the Koch compared $XXX.X first

signs improvement fund before of totaled me flow during our the XX.X%, top was the top This by as came XX.X% saw macroeconomic ago relatively million driven a gross results show the expectations we for of improved as generated in point a XX.X%. line but line Adjusted XXX points quarter XXX by working we cash our Our spring frame summer Similar we acquisition.Let quarter. the flat bottom of during adjusted EBITDA use cash $X the basis the we with by line, and the home build muted our well to related in expansion. segment. used landscape jump basis The busy to over XXXX, continues had fourth our season, inventory the capital $X.X consistent margins in what during the to Koch healthy margins of a as quarter for to improving. improvement macro year first into marking XXXX, to quarter quarter.Free sector million

the X% to our As is continues have we've out The hang rates of all around, mortgage remained These to into heard, homeowners sales, which inflation cutting X% has as are home which from Fed a limiting trade are rates elevated. mortgage. does higher prevented mortgage rate that unwilling a rates. result impact existing business,

to existing downward.In to Pro we weather to last and year, DIY start customers, the were at start While the strong the expectations. we projects, overall busy, active continues and retailers improved continues to agree get foot compared the quarter. both did see happen fell That traffic as our be with the rates market more likely when sales increase line a negative our to home for with meantime, said, in throughout existing smaller move sales to the albeit build, is pent-up our in truck see we with demand home pickup which

break or results, Our down But we'll for hardware X.X%. be with year. structure X.X%, then, were or retailers by Hardware we and PS grew this HPS and protective way sales top environment.On led while continue down are line the Protective second ready. sales. until they're or will optimistic manage half to cautiously a a X.X% Solutions, this right, in To HS business increase if of for that cost net And the bit, our

in up and as chain promotional were activity, by during quarter the wins second we that timing launched well.Driving XXXX business For accessories healthy solid open year. third XXXX, off-shelf PS of quarter net last a sales had XXXX. impacted the HS and of we in quarter, expect the will increase the first them pick a which PS new during were the our year for

a We Koch also acquisition, January benefited worth XXXX. quarter XX, from the closed of from nearly which contribution on full

customers to be acquisition, It's on an about. on the ship working which and additional opportunities It in and RDS, the perfectly. shelf.During fits for some selling excited product and XX-year in which sales really quarter. or category more field new net down the spending, home category Hillman the low on to line, open are we service and that drive a $XX growth in during of will discretionary and our our new important digital keep it's to teams minutes, solutions touch X.X% meaningful sales a Lighter robotics our coupled traffic were product thrilled the Speaking Koch line organized quarter, hardware.We're in existing near JMA are RDS a complex this in customers chain and sales at will with foot weighed million. our few

under using the EBITDA Scott business President Mineki Scott team than and more XX.X% on rollout we RDS and of healthy businesses. our a was RDS RDS, acquisition. the and one about was as Chief has for of of its make via Last the been softness platform were its with key artificial of fantastic key phase margins to as technology a and pressure powers machine that types minuteKEY leader and we behind to founding which Hillman margin in XX.X%, high-margin use members As expand week, in optimistic new the respectively. will state-of-the-art Despite recently, Divisional X.X the Most Scott long-term inflation, our of identification RDS. growth remain joined his The our look consumer I'll impacted X.X.Scott we at opportunities, Technology a identify platform minuteKEY our new in our growth other learning remains the launch. next instrumental moment.Gross system. from Officer and appointed minuteKEY our technology visual designing our and intelligence early Moore XXXX following software remain leverages

in been Our and Hillman to Scott successful and which the a from result great make the who respect Fagundo, industry. original has since in throughout the experience.Scott's minuteKEY. takes continuously XXXX data and Hillman, organization for and minuteKEY the the role. execute him machines reins RDS will of in order a long discipline retire following kiosk to of read, following great ultimately gathering critical success a customer fit this Randy leadership, acquisition joining are Randy quality identify career factory cuts,

excited technology about add field software kiosks, data remote kiosk Hillman. fleet. we're critical are we in man, management, currently contribution of developing that to a his tremendous opportunity and number service Hillman inside going meaningful replenish Think miss companies, for service of our license growth service our it have group Recently, technology.Another of think logging, was fleet vending on of Today, grateful the pricing KX for the and about of and and mechanically to in we in ears for a skilled initiatives. we working believe the that that technology in of are event can luck kiosk KX entire folks to involves at to we RDS, value KX analytics kiosks. promotions, and our growth inventory uptime We best updates, as machine your Scott RDS and our kiosk proprietary our fleet eyes platform. brand-new entire provides XX% discussions X retirement.As troubleshooting We dedicated RDS the machine. customers team. I'm Randy, the selected you with our inventories are kiosks. their keep

non-Hillman the solving place RDS Currently, with XXX of picked complex in machines analyzing time, to our be Hillman. know, technology reps, no This opportunity do for our have and customers FOP. the to along existing talking X Tempe, driving first transponder what needs read markets. could store. ability fobs, test duplication in profitability will diligence, but It's our most minuteKEY office lies second accounts offer KX accounts RFID in customers auto as as These you plant Hillman our growth and half they is key kiosks another front These well in servicing our as Arizona the all and the their with These identify new and for kiosks. will their we of due we to exciting smart metal additional XXXX.Lastly, add to new they of in have X.X. car the begin example businesses. surprise like keys, duplicate additionally, service home us For and did kiosks,

a differentiates the of new these first have slightly results excellent.We year quarter capability retailers bottom has adjusted half first 'XX machines quarter increasing What and machines X for the delivers. our to minuteKEY do more produce for to X consists great expect Canadian and an to retail Hillman with of makes minuteKEY We up the sales ability a others from is on XXX our had 'XX will approximately sizable the X.X value initial EBITDA main customers in XXXX.Now, performance financial experience what a our Canada contribute partner back bring but competitive kiosk them.Heading that that of net can't.Our top the our the its like Hillman support minuteKEY of healthy customers, results problems allows north prior our this XX% top starts and from to our to and for solve as in to for by building end X.X been over border, during feedback Team America. on begin with consistency and consumer customers pillars. us moat our perspective, compared were retailers moat are the year I'd the the from embedded impact with to quarter, can touch of updated a to us XXXX line business

at shelf. and are of the a We've typically regular through for shelf retail years, the our care products service XX sales of the the do service and value Hillman past and stores X,XXX have ship years.Second, providing customers customers our differently, top-notch customer we to to flow for the our customers of on our direct winning folks adding been taking our been customers. that basis, we customers' centers. has distribution Said our at in First, not store team service XX

anticipate with their not clutter store to our needs to our store and XX,XXX of evolving revenue with do lastly, brands service and XXXX. control, can Our comes end working that and of is meet we allow our XX% years top of SKUs, to forging been the with customers. have locations thousands ship DCs And love know they been approximately because of our it the direct over standing From and Hillman VPs strategic from they across customers further long-term table our that average. our our that over Hillman have partnerships moat to have in relationship X strengthen retail North customers and We merchants key for users.Another and to with managers which America the shelf. customers XX our we shipped us on up, component own brings customers and the to

by variety for As that hardware and Pro fraction offer be North categories.Our the one pickup in across cost. market the It's the nor the nature of many of a has markets, a wide repair hardware of to and X%, of consistent the years, demand repair largest X We products products and end products. years, The just perfect a XX products maintenance serve in grown and up and and remodel like we have which in solutions, used maintenance growth our not highs this and SKUs our rate predictable great Historically, provide providers see XX X.X% products and projects, DIY. products hardware of years we truck and solutions makes Hillman respectively. lows multiple without critical both down HS the of are XXX,XXX particular, drive annual the is the up past cycles. related The America, for the up of X.X%, product of cannot these type demonstrated project our overall example XX% projects at that companies. economic business.Over completed make compounded of do

business, feel to improvement the we macro Hillman customers moat. home has very to under yet the and competitive our right performing. for last like continued new it and our our with partnerships win 'XX XX years.Despite has strengthen good been We well industry Hillman where tough Team continue is customers how are about perform our and During now with a deepen 'XX, we environment, pressure,

JMA well about execute control landscape. freight this I acquisition will to customers be to and know ready controllables. cycle M&A when that, We over quickly I'll turn cost, to the this to our will integration ramp the to said, and improves.With the during That continue market team JMA? talk of the it Koch

Thanks, Doug.

in shout our to transferring customers, into which From to and operational I global get get fill Kansas products the our hub our to want out team, healthy our shipped a job inventory. to to XXXX, I first a who is into did carried for operations Before quarter, reducing highlights rates give fantastic working City, XXXX. our maintaining

our that our best very successful our into the in of first care a we quarter on this a have customers. experienced continue business.Coming great controllables. They that how We take focus while knows of the XXXX, controlling We team the momentum are executing plan to off maintained year. the

freight locked start by Let X. in costs, on we me quickly May hitting inbound which on

base the spot market, turmoil in volatility and are the in about the XXXX that Taiwan last for.Many like of rates increased about first from is averages. costs, during remain what Panama that in pleased our Sea Red we the following have are slightly at contracted Given planning container XX% delays XXXX our This than and the we we Canal, we of steel are XXXX year. quarter input contracted locked increase the of versus China, India average, the below but higher X/X

Koch acquisition come X,XXX courting the supplier in rope was Koch related was and improved the that SKUs our family-owned been a has of hardware over we chain business overlap. leverage and modest years has acquire products now year, on Industries, and During Koch. We've down, to and for customer Koch timing this closed a with January of should right Midwestern-based history. a of rich to several continue a great

family.From job have so Koch the Hillman integration of to doing for smoothly, an Koch my gone hats team great and off the We excited ahead schedule. to a and welcome and are to standpoint, doing things Hillman

we Koch's our leverage acquisition products.Let moat Hillman me examples. and very to ability and several are ours Importantly, resources about well is to as you space. their see enter this on excited with through What walk customers this Hillman's love as board

their sources and network be leverage most Koch our this will First, Asia, on front. efficient from of sourcing we products to more

border, of improve Koch its Koch third hardware day.Fourth, the to shelf, at the clean costs for the its believe Depot products ship and looking nor customers customers. the ships any to can a these previously at does has the to be not our and in a white XX% product customer.Third, tricky we well.All ACE. the and service stock are the sell excited this of and apply team. grow products allowed chain we a with very growth Home market by store on broken the this will as keep space, We does and and save is expand its of Second, market will to Koch. its traditional only into. to business rope which opportunity believe of we opportunities sell see which at with north the thrilled sales about products Hillman. used have any of among Koch not we service relationships centers distribution into share fifth, the And not as with great Lowe's to now business Altogether, It our direct grow does party quality us Hillman Canada. serviced Hillman-Koch category and each in, the team in every service we do organic Canada by approximately Once category we has This organized With shelf is to Koch shelf.

a acquisitions will including Koch. management turning, We think like growth, and about relationships.We to landscape, integration As our can are have we Once execute our many well understand our size the per dedicated with long-term companies Koch gets a out and that think moat would year the we and we exceptionally that believe it perform M&A there project multiple M&A growth. there are flywheel organic that similar successful M&A team. drive

customers. directly deliver to We on we truck and products as service seek the moat Hillman more put our to for will the leverage to

by to me it year.With Rocky For disappointed Rocky? financials. Koch's least at grow that, we to example, turn XX% would don't over if talk next sales be net I let

Jon. Thanks

Let me in, grew X.X% XXXX right million, prior of the quarter an $XXX.X of million. versus $XXX.X of in first net jump increase the quarter sales year

XXX points of adjusted by year to XX.X%. gross increased prior XX.X% First basis margin quarter quarter versus the

We challenging to team XX.X% environment.Adjusted are SG&A quarter. have am our worked hard we as from percentage here and really to during the how year-ago from quarter of proud of a and I XX.X% the performing in increased a get sales

been versus basis our adjusted year.Adjusted XX.X% net the in healthy the of remainder bottom in very quarter, grew quarter quarter. was our drove during XX.X%, first million, which by XX% the up the let the the year to Excluding be a bonus the cost, Adjusted favorably was offset around just quarter $XX.X turn have of sales expense, quarter. XX which of EBITDA year by of strong sales macro a increase was partially EBITDA me in a to ago ago standard line should a the EBITDA would during driven was percentage as result for SG&A points first Adjusted mix price environment.Now and which flows. cash XX.X% positive soft which the compares margins, to employee

adjusted me million, acquisition XXXX weeks For line seasonal was March Capital in as million the turn use first approximately We weeks period.Free and revolving our and we to expenditures of March Koch outstanding, taking from million which build of net the end of debt the for the million expectations.Now, cash compared net X.X We and facility net XXXX maintain million midpoint $XX million our with operating to XXXX quarter a compared end borrowings were ago.Looking of ended cash of to increase million million line was leverage, expectation the the to we better first $XX.X the total X.X generating around for consideration million inventory fall in X.X the forward, consists of an sheet. XXXX. quarter. ended the XX $XX our with $XXX year typical compared balance the the at EBITDA assuming near XX of This with $XXX of with in ratio of in liquidity, generated full of XXXX quarter $XX.X into $XX.X times period. guidance. trailing let to compared ago $X.X of and our ago available this $XXX.X period. quarter the our debt our year than of times cash XXXX, XX at turn credit million XX, year times months of XX, After prior to total ended totaling equivalents.Our under activities end the $XX that end of will year flow a X.X the in million we times $XX.X ended the XXXX, expectations,

During basis In term the repriced interest by our spread we the costs. borrowing points note. lowered on rate also quarter, so we XX our doing,

guidance across the somewhat Koch million We first the $X.XXX be has $X.XXX note. should All result to basis the full times our a two leverage net reductions reiterating midpoint billion. to loan mentioned midpoint a term XXXX. about from expect three XXXX term with a price are sales volumes, and $X.XXX lift net midpoint savings X% of Doug sales over from results, year wins and QX which forward Additionally our X% the lien point below a in in, billion we ratio business as X% assumes savings reiterate by of of our another acquisition.All year earlier, full pleased to dropped and agreement with lift X.X% these from defined increase all three following our the we XXXX these between This on are implies the million flattening from credit metrics. result save together decrease during X% as a new considering $X market curve.As headwind a XX

increase of We million of are to EBITDA midpoint between represents XXXX. X% be full our guidance and about versus XXXX million. a adjusted $XXX with reiterating $XXX million This $XXX an midpoint year

to expect think a the market the remains growth the before as of digit soft in organic our are during could COGS flow our achievable.With to feel adjusted and million midpoint on a to several longer top working unchanged XXXX. is $XXX free we our now expect is XXXX is and longer-term has intact. term switch free healthy continue EBITDA growth the to Historically, and capital me cash realistic to Doug. it the flow has line mainly high XXXX, margins efficiencies by million is due perform growth low growth year M&A. our benefit.Longer grow we adjusted we our longer-term be lower our believe free flow million to starting which full in still business to we algorithm on, high target, around as cash look case, term, gross business further to in is be term.Lastly, in XXXX, million. years double confident we well which we top remains control that earnings over-index from single similar to to of between the driven the with to of our This cash with year to XX%, single expect below next for will we normalized increased as $XXX line $XXX EBITDA to XXXX, And our we to turn adjusted slightly full above our year we The very digit $XXX the earnings have over environment, we mid-teens our we $XXX come out business If EBITDA X% continue that, our reiterating We seen where million controllables.Looking our presentation.As growth is guidance a about per call, organic minimal let capital. that are macro at assumptions point, impact talked call this driven from and last in run long in back working if that available benefit remain low more to earnings M&A turned low and teens

Thanks, Rocky.

We Hillman to teams landscape, dedication distribution by sales market team, customers commitment commitment support importantly, tireless associates of and that service that, effort service is shareholders. in of call the our team growth provided valued our come.With success this our this customer the will to remarks foremost the of extend forward or strengthen want profitably and portion prepared to dedicated our moving Hillman's of years the Q&A customers, customer competitive exceptional call. focus execute questions, begin maintain Thank our appreciation through and navigate is commendable. discipline we supportive whether believe care our to business. the we'll taking and your ensure and Towanda, our would. concludes most if you.Our open and centers, you strategy thank across seamless their for great our the As the the I approach for our moat, dynamic to This firmly operation for we it's our

Certainly. our [Operator Instructions] and one first moment question. for

will question coming of Benchmark. first Our Reuben from Garner be

line Your open. is

Thank Good everybody morning, you.

Reuben. Hey,

maybe, of as some So and up big the seasonally year progresses? or box not categories. in we've Can normally couple risks destocking or your and seeing seen of destock, you in heard kind a what ramping at hearing any least of what's purchasing they like would about you're talk markets like inventory channel, the

we destocking because the that plan the much. people, they've sense it don't for store. they have ship is Reuben ship POS makes think And DCs. to then We through I slower, -- and most mean to total goes because direct got too I when problem,

I'm So worried not in so that. DCs, and about no pipe there real there's the nothing there's

into distribution then great. probe made larger of we last. the flash customers And since your one of Okay, space,

longer talk you any of that about pro what to your of or is of or opportunity -- can kind market guess, term exposure present in a an maybe kind way? the I bigger categories play you other and today So for lumber in this to roofing yards kind

that pro customer pool this is to platform. think on strengthens offering a and right I the contractors. a hell SRS of -- focus serve They Depot they it mean really roofing I now residential and landscape

because we think it's but to that us have that in we and relationship they're Depot because dedication to leverage be as and we find really to This very a great with helps to them. the want Pro grow, is wouldn't ways I think it will be business, strong. a we they'll So able they big and their deal help

Great. Congrats going situation. on forward the strong results guys and good luck

Thanks Reuben.

Bouley will next question come of Barclays. from Our Matthew

line Your open. is

morning. Good

that about that bit base to of on expectations your I locked how as costs? as You the the would And ringing your margins much know what rest just costs? freight your -- margins you to I Matt gross be or into XXXX? could your you today. for wanted does to Elizabeth able not you year? that speak said that whether little impact rates, reflect a in ask through of contract you Or have around And transport speak that total far the for could implications gross

Yes.

start -- I'll question Jon rates. the Michael I'll So, is answering by with Adinolfi contract here. around this start

our in rates. locked we've So,

As we mentioned, we on contracts. shipped well over XX%

our Rocky we're very rates So, flow on our XXXX. to in margins. able the position speak to good I'll and feel We product. good about for we're impact continue contracted let we feel actually to like

Yes, we we Elizabeth expect full said is we to be what consistent what that would margins historic last year. for I you quarter is tell the think above with

XX% understand that's XX%, have that And seeing or at also remainder you of above back high. for by were so about costs, you as from go coupled we're freight.But of remain numbers in driven stubbornly those to be we XX% our product the of And expect if the mix think what time with to we year. some to products the they

actually -- go is U.S., say the our port inbound initial outbound DC to with when and an DCs or get to that to should from products high freight to the So, as our coupled from example continues still up. I

what I we'll above be on that happy rate. go we've would We XX% that continue rates which with we're nice up, so consistent labor to said say balance. or remain balance, a it's see at will But is

second relative how the then about to about to you. through previously? and half into your thinking the as Thank were be there are volumes through you're the with XQ And kind thinking of thinking rates for second kind what higher half you longer, trends Okay. seeming you of

range. you the our the business our of way it might little assumption.And year. at But the see get this we're with to better Elizabeth, when continuing Yes, of run that with point, down to planning the that towards year to we're and this we certainly the XXXX, talked about shut we we that plus X. set than better end it X And going structure does cost be in end up But that. everything basically toward year hoping we're a that and

Yes, what year line. even of a to purposeful costs we've to nice only is that I said prior from our X of we've think been profit I cost still perspective generate thing profitability really about ability see we below what in down gross add the market, the and manage which because our kind would above is we expect

Yes, this lot help operations really is a be can. up situation than with does volume to more of where manufacturing cost a with and you it can bunch because a of be fixed not agile companies loaded

our like position. we So,

for the Thank all Great. you color.

Sure.

CJS will And Securities. be next from our of Lee Jagoda question coming

open. line Your is

morning. good Hey

Lee. Lee. morning Hey Good

some not kind So, that what -- be guess leverage yours. going exactly you addressable they're And earlier kiosks not in you of servicing, or like model speak market associates maybe then after that to had this? Can I you're sales just to sense mentioned the of on the kiosks your looking here? at are to your are the other related that that working going

with contracts folks. Yes, signed NDAs Lee. We've and

say in very to growth. of than kiosk retailers into as solid path we're go and exciting glide what's a as company that already detail other about it's this can't one is a I in So,

getting and capital. is DS other flex. They to Tempe. us nice our that and machine they happy have and their profitability their be I big And of refurbish model surprised also tires then has on because a can to. really us. could make We at It's with could exciting the started just ambitions.So, that kicked without been see machines are their platform what company we chose, they grow we KX The wanted they've pleasantly and going we're if so Rocky's certainly that can both is

And a for pretty interesting so us. opportunity

know we've we'll to signed up I've and we see. it but just talking for just bit a been You about

to Lee fleet The looking that that we RDS the expect add margin at. is wouldn't would your second would the question, part I only thing, be Otherwise incremental the we business. or above at be would it in

combined for No, the guess have these that base any customers can kiosks what today? I two installed assume categories there the the would would correct. are we and a that sense I mean is just in been get of I

You to be figure you you'll give know, piece any Lee if things I able out.

probably stay I important So I'm apologize. to is just I'd away partnership. an new going from. this

in and have about the back focused this M&A, short It one the when how then return you now metrics M&A? remind line. more flywheel in guys And like on the maybe are Doug. us got think sounds leverage the medium Okay. that started at term? guys Rocky we've on you are look just And you What just categories you

I dozen Yes, think interesting. There are think makes half sense. categories that if you we think really about a it's

three of we're at right same ZIP we or just and sense leagues just those every it's a a about good it And kind us. in feel because of think about and that that same. Code the for funding is deck Lee sense time that all is, I in EBITDA makes of portion spot. the that open bulk in we So about now. companies we've my if sweet code got up total that you of look major kind And lapped looking seven that are We've got type I the you're the

you'll a get three is X,XXX. about lot If you've XXX% probably in working of got you're one on that

And feel arbitrations the touch I good the So can on think about that. yes. you maybe return there, I Rocky

return where help many two if Yes. the type again these on as think because sizable XXs to high say And us deals they XXs single-digit about of is they low we I to high spend a excess we heard this turbocharge these the better think way if our me acquisition growth. piece run to exciting we I impact in you we've particularly fit capital in they're point. these leverage.And organic businesses, pay to times you've the not all that expect investment Lee. as they year for as mid the at like moat mean there's metrics Koch well to real multiples said don't

be to You're very XX% example. weren't a Jay may That's He Koch. would commit a disappointed if next year. we prime

guy training which his going off, was just to wheels took From that a

Well big Thank guys. -- home. go or go you,

Stephen next line coming Jefferies. next open. is Stephen, our your our question. from of be Volkmann for moment One question And will

to I'm if what morning, expecting on Good top-line sorry Hi. able guys. say year? I contribute you're missed Koch the this. Are to this you

expect to XX Yes. Koch call be of revenue. XX million it to million we top-line

it. Got

sort be these these of to are of do you do how they get acquisitions? seems we here Okay. have And these Are since that of up? again about think come margins should kind up flywheel nichey that? we don't to a starting them high-margin then lower up? to really bust in at the businesses you also chance about and How Or sort fix kind then of think

Yes.

can ones mean gross our structure how vary is on margin me fleet from thing interesting looking EBITDA we're tends similar on at the the that depending varies get they to HF, I right now. the start, the to Let like and margin just Steve. market PS but to be

And helpful. mentioned was that basis then think headwind finally you outset That's price something. the like this great. in Okay, quarter the XX points I or

I that how's just expectations? think relative that. got But playing I out to

it's show I that. or with mean like category. at price But about uses point. And you don't I It's retail. not that help price you news elastic not their margins and a retailer our see an the on if reductions it customers we up think playing given have to normally be at working thought to industry it's is out category great that the we're this our

with a Rocky as a customers. year X%? So But our structural for working that's a I said the think really thing about And we're helpful. that's I think we

the the base. to categories, different obviously think And what as rates different out that's inside you across it quarter. is blends gate the X%, what XX different bps that's Stephen first Yes, in customer, but in it's the about

Understood. Thank you.

you, Thank

And question. for next one moment our

coming next Brian McNamara be question will Canaccord Genuity. of Our from

line Your up. is

good Hey, guys. morning, the taking questions. Thanks for

think are and of sustainable QX of your in balance I'm about of for of price the cadence How retail being how some about First back. the gross margins the for the a year? partners QX pretty curious context gross the impressive margins aggressive asking should we

right Brian, gross Again, the of as the are. we our where slightly timing we margin good anticipate with we've that we lower our our and feel we price some will expectation that feel mean, for would whole it's we of thing and I remains because be customers But as back expectations better than that or in at we price come done the about would and about The the year. just good above about little that year, what and really givebacks. to Yes. said, think have the We hang XX% full the where we that we've the been of are. of most half on fair a are

of the or the your in your combination your And Is more flywheel leverage, investors check, opportunities sensitive maybe keeping in M&A seeing to then can just capital of current And with a allocation restart simply function it. Got this us another who opportunities particularly more balance how on one M&A. comfort be of overall a of while and you level? both? remind a leverage for might priorities you M&A the little leverage marketplace,

Yes.

that the there think talk opportunities we We've it is that.The us opened the folks. point up in leverage Brian much. about I'm markets and because very lucky a and hasn't where for our question continue just direction answer comfortable at part doing folks a really that I your still now we're the market been really first debt debt is there a ready and equity any now to heading haven't private is to that of lost been have been that to haven't

we're have equity they rather a feel spot the trust markets really we I much think goes like private would now. is So learned and and what entrepreneurs us that with nice right comes business. debt their in and And the with

they think equity. than I private would

So our really I think advantage us a it's that I leverage is right that. we've determining good got real timing for but now, think and

on then capital mean with allocation. just add Yes. and I

machine there there's If customer those right a builds or first think racking Our spend is to example we with as going CapEx. first. are always returns do to money the priority risk that new an be low always high

there to great opportunities But those. us and the do goal but M&A, either going three the around that. couple off acquisitions. the we're the prudent this get doesn't year, see I has us our you'll with we expectation of at grow leverage bring a we'll can for even be is think to next is and more of us a to the below when going very Our Really provided that down debt, platform reasonable multiple. example. those around needle for a pay street remainder didn't has the is If that a great us you're leverage find that Cook over move but business see those

luck. guys. a Best Thanks it. Got of lot,

Thanks, Brain.

Thank you.

coming one for And question next be next our from question. moment our William will Merkel Blair. of And Ryan

Your line is open.

thinking you about start were into the morning, in in April to XQ? XQ XX everyone. question. taking up from line should the can talk with sort you XQ? Doug, for what of good normal and assume Thanks Did seasonality Hey, Hey, XX% we come

I planning is of year, from what seen what of continuation. Yes, January improved expected, about off everybody. that's jumped it. It how of but so we the for that, we're Ryan, for tricky slightly was It's not and basically mean, had far the there. just kind kind we've has

consumer year unless So more you'll the one not is still I we peg see feel but historically, starts plus do confident seasonality, than rates a and have to they some for the the think right as down our four bad now. change

about the Yes. to that, add of a it's because, and is profitability jump The right? as same I the product Ryan, then you quarters only perspective, more do from add we'll most we kind through the believe And machine. second third thing QX seasonal we're are only always QX, Our yes, there, would think Rocky, our the profitable see thing I'd thing putting

Got it. Perfect.

And on impacted is XQ where I'd the why why is than RDS. there, business a better? -- lot the that share dig That keys you missed other into doing comments our question And in a of that's a it to you it more just out other because impacted than how where model it's Okay. businesses. bit like and was RDS taking just were little more the a why like isn't businesses? then of one putting was

not the I down selling PetSmart you with disappointed discretionary. anybody engraving in that it's the all I patent, patent mean of XX% food. They're shrinkage and answer if for your XXXX and side at the to first XX% it's is, pet Ryan, question X%. Petco a now things say, and example selling owned that RDS. and look with in XX% because -- ownership would the other question you it's a dog they're go great we're in trash look at households if

also So, date key. year footsteps that have footsteps drives been we an And into that to drive of the know cutting going people eight eight impact. do footsteps XX down do has and and

sales the say but I other get business car So really are that's Bob, out what used we the think where when used our mean impact.I car aren't we to sales. just smart has is thing when they we on filed. mean are, going like people

our biggest the excuse an one. issue not so And is same

Bentonville honestly, or your a to way may them disagree run Macmillan in be or don't vestibule versus As or relocated you it and Auto you'd not cut I goods they with in you five wall store And that Center, from paint kiosks know quite they've four future, said situation department. out They've there. either sporting store make on keys last and in front to way consumer the visits the folks the time, where the you basically And and the could your have strategy I got the of could the machines the into front and there in. the taken register. a by moved front the

doesn't business. for help it I think one kiosk but it's probably them, a the good

problem. been there. move biggest they biggest And that see sort And other our machines to so, as normal we our and problem our let those and should new but retailers, out is pick we up those got has we've what thing the keys at that's it

little that's X.X. said why than we we're -- for worse the pushing but a we So, and as really thought, it's

the what's many on the that capabilities there. for consumer key are going on but different So that's machines,

existing homes. When think the that's is done repair, home bigger impact. the have is happening DSO we add businesses, business of other believe just our think with where me much which our what is When for quick maintenance, regardless discretionary, remodel, Let and remodel our either by impacted existing is sales to there. maintenance spending entire about you about so discretionary pretty going buy you repair

why Canadian by these our because question impact all. your business not RDS whereas factors to a impacted are protective are bigger is the again businesses parts about, hardware in So entire macro but

you. pass it I'll Thank helpful. Very on.

Ryan. Thanks,

for our from question next Quinn of open. moment Fredrickson your come which will One Quinn, line is Baird.

Hi, guys. good morning

Hey Quinn.

SG&A. color year were of XQ there? the XX% just right, that wanted to just I the maybe that called sales the of that Rocky, ask rest onetimers some is out, got you said you I on around if you think First, in where any of

where the year that be. the a were the first we expect that's little we to bit quarter, Yes, over of in remainder but

on Okay. for and drove of the quarter, you in can you, unpack And Canada sustainability from just secondly, very strength what margin have maybe kind Thank you them. that the here helpful. then

and they margin mix. some And profiles 'XX underwhelming. for fleet. bright and then their spot that's install machines first one but Yes, up started than the key of smoked many They've for business Quinn, quarter They've new started them, key their the their say business. in it, also our picked their I'd core was which will they better to to help love

a, comp. So easier it was

right. All guys. you, Okay. Thank

Quinn. Thanks,

turn comments. I'm Instructions] to for to the Mr. showing closing now further [Operator And no I Cahill questions. would call like back

to joining And on Jamie look everyone good to Thank We us his forward you congrats again call, everyone. you this progress first for updating on summer. this Thanks to earnings our getting job. morning.

disconnect. now may You