힐맨 솔루션스(HLMN) 2026년 3분기 실적 발표회: 사상 최대 매출, RDS 성장 및 업데이트된 가이던스

핵심 요약

• 2026년 3분기 매출액은 전년 동기 대비 8% 증가한 4억 5,750만 달러로 회사 역대 최고치를 기록했습니다. 신규 사업 수주가 약 5%포인트, M&A가 5%포인트 기여했으나, 핵심 사업 실적이 2%포인트 하락하며 일부 상쇄되었습니다.
• 조정 EBITDA는 2.4% 증가한 9,020만 달러로 역대 최고치를 기록했습니다. 조정 EBITDA 마진은 관세 부과 시기와 규모의 영향을 반영해 전년 동기 대비 100bp 하락한 19.7%를 기록했습니다.
• 잉여현금흐름은 전년 동기 910만 달러에서 5,110만 달러로 증가했으며, 영업활동현금흐름은 6,990만 달러에 달했습니다.
• 로보틱스 및 디지털 솔루션(RDS) 부문은 미니키(MinuteKey) 3.5 출시 효과로 19%의 매출 성장을 기록했습니다. 힐만은 2026년 동안 1,700대 이상을 설치하여 총 4,800여 대의 미니키 3.5 기기를 현장에서 운용 중입니다.
• 경영진은 2026년 매출액 가이던스를 16억 6,000만~16억 8,000만 달러로 상하한 범위를 좁혔으며, 조정 EBITDA 가이던스는 약 2억 8,500만 달러, 잉여현금흐름 가이던스는 1억 500만~1억 1,500만 달러로 기존 수준을 유지했습니다.
• 2027년의 경우 경영진은 소매 및 프로(Pro) 채널에서의 신규 사업 수주와 기존 완료된 인수합병의 3%~4% 기여에 힘입어 8%~12%의 매출 성장을 예상하고 있습니다. 회사는 거시경제적 수혜(순풍)를 가정하지 않았습니다.

주요 재무 데이터

사업 및 영업 실적

하드웨어 및 보호 솔루션

하드웨어 및 보호 솔루션 매출은 5% 성장했습니다. M&A가 약 5%포인트 기여하고 신규 사업 수주가 프로(Pro)와 소매 채널에 균등하게 분배되어 약 2%포인트를 더했습니다. 반면 핵심 사업 실적은 2%포인트 하락 요인으로 작용했습니다.

경영진은 회사가 프로 채널에서 점유율을 계속 확대하고 있다고 밝혔습니다. 신규 프로 사업 수주는 2026년 힐만 전체 매출 성장의 약 1%에 해당하는 약 1,600만 달러를 기여할 것으로 예상됩니다. 2027년에는 프로 수주를 통해 전체 성장의 약 2%에 해당하는 3,300만 달러 이상의 매출이 창출될 것으로 경영진은 전망합니다.

개인 보호 장비 사업은 판촉 활동 감소 등의 여파로 계속 압박을 받았습니다. 경영진은 4분기부터 상황이 개선되기 시작해 실적이 보합세로 돌아선 후 2027년에는 성장세로 전환하는 것을 목표로 하고 있습니다.

로보틱스 및 디지털 솔루션

RDS 매출은 19% 증가했으며, 조정 EBITDA는 13% 증가했습니다. 조정 매출총이익률은 79%, 조정 EBITDA 마진은 30%를 기록했습니다.

미니키 3.5가 주요 성장 동력이었으며, 특히 힐만의 최대 고객사 두 곳에서 기존 가정 및 사무실용 열쇠 복사에서 자동차 열쇠 복사 기능으로 확장한 점이 크게 기여했습니다. 해당 고객사 대상 배치는 4분기 중 완료될 예정입니다. 경영진은 4분기에도 견조한 성장이 이어질 것으로 기대하고 있으며, 기기 설치가 본격화됨에 따라 RDS가 2027년에 두 자릿수 성장을 달성할 수 있다고 설명했습니다.

캐나다

캐나다 매출은 9% 증가했습니다. 주로 프로 채널에서의 신규 사업 수주가 8%포인트를 기여했고, 핵심 사업 실적이 1%포인트를 더했습니다. 성장 요인에는 기존 소매 고객사에서의 신규 제품 카테고리 추가 및 캐나다 주요 고객사와의 볼트(Bolt) 패스너 프로그램이 포함되었습니다.

인수합병 및 자본 구조

힐만은 산업용 유통 고객을 위해 4만 4,000개 이상의 패스너 SKU를 보유한 유통업체 케인브릿지(Kanebridge)의 인수를 완료했습니다. 경영진은 해당 사업이 기대 이상의 실적을 내고 있다고 밝혔으나, 해당 분기 일부 기간에 대한 매출이나 EBITDA 기여도를 별도로 공개하지는 않았습니다.

회사는 2026년 동안 3건의 인수를 완료했습니다. 또한 7억 3,500만 달러 규모의 텀론 B, 3억 7,500만 달러 규모의 ABL 회전한도대출, 그리고 케인브릿지 인수 자금 조달을 위한 2억 달러 규모의 추가 텀론을 통해 자본 구조를 리파이낸싱했습니다. 만기는 텀론의 경우 2033년, ABL의 경우 2031년으로 연장되었습니다.

힐만은 3분기 중 주당 평균 7.75달러에 63만 9,000주(총 500만 달러 규모)의 자사주를 매입했습니다.

경영진 가이던스

시장 물동량 개선이 당초 예상보다 미진함에 따라 매출 전망치가 하향 조정되었습니다. 경영진은 새로운 중간값이 이전 성장 가정보다 약 1.5%포인트 낮은 수준이라고 설명했습니다.

2027년에 대해 경영진은 힐만의 장기 목표 범위인 8%~12% 내에서 매출 성장이 이루어질 것으로 전망합니다. 기존 완료된 M&A가 3%~4%를 기여하고, 신규 사업 수주가 프로(Pro) 채널에서 2% 이상, 기존 소매 사업에서 2% 이상 기여할 것으로 예상됩니다.

힐만이 HPS, RDS, 시설 및 물류 네트워크에 투자함에 따라 경영진은 2027년 설비투자가 소폭 증가할 것으로 예상합니다. 계획된 프로젝트에는 신규 신시내티 물류 센터 및 캠벨 체인 앤 피팅스(Campbell Chain and Fittings) 시설이 포함됩니다.

추가적인 유의미한 M&A가 없다고 가정할 경우, 경영진은 2027년 말까지 순레버리지가 약 2.5배 수준으로 낮아질 것으로 예상하고 있습니다.

리스크 및 주요 관전 포인트

• DIY 및 주거용 프로(Pro) 수요는 거시경제 환경의 압박을 계속 받았습니다. 경영진은 2027년에도 거시경제적 환경이 호재(순풍)로 작용하지는 않을 것으로 보고 있습니다.
• 기존 주택 매매 건수는 안정화되었으나 개선되지는 않아, 전반적인 수요 회복에 대한 가시성이 제한되었습니다.
• 관세 부과 시기와 규모가 마진에 계속 영향을 미쳤습니다. 3분기에는 관세 관련 순환급금이 소폭 포함되었으나, 무역확장법 232조 철강 관세 조정으로 인해 대부분 상쇄되었습니다.
• 힐만이 전년에 시행한 가격 인상 효과가 소멸함에 따라, 4분기에는 가격 인상에 따른 실적 기여 효과가 줄어들 것으로 예상됩니다.
• 매출총이익률과 EBITDA 마진은 계절적으로 1분기와 4분기가 2분기와 3분기보다 낮습니다.
• 케인브릿지 인수 이후 순부채가 증가했으나, 경영진은 추가적인 유의미한 인수가 진행되지 않을 경우 디레버리징(부채 감축)이 이루어질 것으로 예상합니다.

애널리스트 Q&A 주요 내용

• 2027년 성장 구성: 경영진은 예상되는 3%~4%의 M&A 기여도가 향후 거래가 아닌 이미 완료된 인수의 기저 효과(1주년)를 반영한 것임을 명확히 했습니다. 신규 사업 수주는 프로와 소매 채널을 통틀어 총 4%포인트 이상을 더할 것으로 예상됩니다.
• 케인브릿지 가격 정책: 경영진은 케인브릿지가 과거부터 시장 상황에 맞춰 제품 가격을 조정해 왔으며, 이 같은 가격 책정 방식이 인플레이션 압력에 계속 대응해 나갈 것으로 예상한다고 밝혔습니다.
• RDS 수익성 구조: 힐만은 RDS 서비스의 조정 EBITDA 마진 목표를 약 30%로 설정하고 있습니다. 고객 매출 공유 비용이 판관비 항목에 계상되기 때문에, RDS 성장이 가속화되면 재무제표상 판관비가 증가할 수 있습니다.
• 4분기 여건: 경영진은 4분기가 3분기보다 소폭 개선될 수 있으나 시장 환경은 여전히 부담 요인으로 작용할 것으로 예상했습니다. 케인브릿지 실적이 분기 전체에 반영되어 M&A 수혜 폭이 커짐에 따라, 신규 사업 성장률은 3.5% 초과에서 최대 5% 범위를 나타낼 것으로 기대됩니다.
• M&A 파이프라인: 경영진은 인수 기회가 여전히 존재하고 매도자의 눈높이도 다소 낮아졌으나, 힐만은 자체 수익률 기준을 지속적으로 엄격히 적용할 것이라고 설명했습니다.

실적발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

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

Michael Koehler

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 Kraft.

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. 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. JMA 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.

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

Jon Adinolfi

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 Kanebridge. Kanebridge serves as a long-tail master distributor of fasteners for industrial distribution customers. As the long-tail distributor, Kanebridge provides its customers a wide assortment of hard-to-find and low turnover products from a convenient single source. In total, Kanebridge 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. 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 closed the Kanebridge acquisition ahead of schedule and are pleased to report that the business is performing ahead of our expectations so far. We believe we purchased one of the best businesses in the space and Kanebridge 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. During the third quarter, net sales increased 8% to $457 million. We're 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 compared to just $9.1 million in the year ago quarter.

RDS had a great quarter. Net sales growth accelerated to 19% versus the year ago quarter, driven by performance of MinuteKey 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 2 customers, we've seen healthy growth in our overall MinuteKey business. The economics per upgraded 3.5 machine are meaningful and improved over the previous generation. MinuteKey 3.5 continues to prove itself as a platform for both top and bottom line growth for Hillman. Today, we have approximately 4,800 MinuteKey 3.5 machines in the field, bringing the total number of installs to over 1,700 this year. We'll finalize the deployment of these machines at our top 2 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 5 points of growth from new business wins, 5 points of growth from M&A, partially offset by 2 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. We think of our core performance to be similar to our customers' same-store comparable sales metrics. Of the nearly 5 points of new business wins, about 3.5 points were driven by new wins in retail, highlighted by the sizable builders hardware expansion at one of our top customers. And nearly 1.5 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 strategy 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. 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. 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 are lowering the midpoint of our full year net sales outlook by about 1.5 points.

We continue to believe that our full year adjusted EBITDA will be approximately $285 million, marking an increase of 3.5% over last year. And we continue to believe our full year free cash flow will be between $105 million 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 in 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 that 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. 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 touch point 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. 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. 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 up 9%. That was driven by 8 points of new business wins, the majority of which came from the Pro channel and 1 point of core performance growth. New wins included revenue generated from new product categories at an existing retail customer and the Bolt fastner 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.

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 Kanebridge 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?

Robert Kraft

Thanks, JMA. 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. 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 Kanebridge acquisition. Assuming that we had benefited from the approximately $29 million of EBITDA that Kanebridge has generated over the past 12 months, our net debt to trailing 12-month adjusted EBITDA ratio would be 3.1x.

Assuming we do not do any other meaningful M&A, we should end 2027 at roughly 2.5x 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 Kanebridge acquisition. 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. 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 million and $115 million with the same $110 million midpoint. And we continue to expect our full year 2026 CapEx to be in the $70 million 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.

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 3x the free cash flow of last year. We have closed 3 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.

Jon Adinolfi

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.

Operator

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

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Lee Jagoda

So to start with a couple of easy ones. Just do you have the Kanebridge revenue and EBITDA contribution for the partial quarter in Q3?

Jon Adinolfi

Lee, we're not breaking out Kanebridge 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.

Lee Jagoda

Okay. And then, Rocky, just the guidance you gave, the soft guide 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?

Robert Kraft

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

Lee Jagoda

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?

Jon Adinolfi

Yes, Lee, 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 2 largest customers. So that's what's really driving the growth. So getting the 35 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 what we'll do in Q4.

Rocky will add some color.

Robert Kraft

Yes. 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. 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.

Operator

Our next question comes from the line of David Manthey with Baird.

David Manthey

So yes, 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?

Robert Kraft

Yes. I think -- I'll just take you back, Dave, to our Investor Day and the algorithm, right? And so if you think about M&A at 3% to 4%, 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. We expect that to be at least 4 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 market 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 kind of a bit of a headwind as it is today.

David Manthey

Okay. Did I -- I thought JMA said 200 basis points from new business wins in '27. Was that not correct?

Robert Kraft

No. I think as you think about -- I think JMA was talking about the Pro that we expect that to be 2 plus this year, we're running at 1 plus, and we've really just started kicked off a lot of those initiatives in the last 6 to 9 months. And so as it continues to gain momentum, I think you look at 2 plus from the Pro and then 2 plus from our normal retail business that we've done historically.

David Manthey

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. Could you discuss how Kanebridge deals with those inflationary forces and sort of what's been their track record over the past 5 to 6 years?

Jon Adinolfi

Yes, 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 Kanebridge business, which, as I said, has performed well, strong gross margins, great service, adding our global 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 annualized pricing marketplace. So deal with the market pressures that you mentioned there in that business as well for Hillman.

David Manthey

So that the price pass-through at Kanebridge, more of just a product pricing exercise as opposed to a shelf price exercise. I'm just -- as you said, their experience over the past 5, 6 years has been pretty good doing that, translating that to the market and keeping ahead of it.

Jon Adinolfi

Yes, they have. They've done a really nice job being able to manage that over time. We've got a team of -- 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, I'll say, 5-plus years and really over their entire history. They've been in business for over 50. We feel like that will continue in 2026 into 2027. So yes, they've covered it and will continue to do so.

Operator

Our next question comes from the line of Andrew Carter at Stifel.

W. Andrew Carter

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 business is kind of flat to up 6%. You take out the new business wins and kind of some residual pricing, your kind of volumes down mid-single digits to flat. 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 -- I'm sorry, in the HPS and Canada business? And then, of course, that's also an impact to RDS.

Jon Adinolfi

Yes, Andrew, 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 from a market perspective, 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, and 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.

Robert Kraft

Yes I guess with 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. 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 grow new business as we have. So call it, somewhere north of 3.5% up to 5% 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 Kanebridge for the entire period.

W. Andrew Carter

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 1 month in Kanebridge 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 million for that business, is that a good run rate plus, of course, Kanebridge as it gets fully anniversaried will be accretive?

Robert Kraft

Yes. I think as we think about it, that's a good number when you put all the numbers together. We're in 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 then 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.

W. Andrew Carter

Final question. On RDS, kind of the performance you have this year is you broke out the new business wins, which would be the MinuteKey 3.5. I guess as you sit there and think about run rating both the new business wins you have as they 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 4% to 6% or the kind of company long-term rate that you put for RDS next year. Of course, that's all organic.

Robert Kraft

Yes. I think the -- 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 in RDS, it would be our expectation that it would definitely be above fleet 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.

Jon Adinolfi

Just to tack on to that. I mean that goes back to the -- our organic growth being plus 3% for the quarter, really an important proof point for us. RDS obviously drove a good piece of that. But we're really 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'll continue to drive in Q4 and into '27.

Operator

[Operator Instructions] Our next question comes from the line of Matthew Bouley at Barclays.

Matthew Bouley

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 delevered slightly. Obviously, you had some good growth in the quarter. Anything kind of onetime in there? I know in the past, you talked about bonus accruals in Q3. So just anything we should consider about how to model that going forward?

Robert Kraft

Yes. No, the only thing I would call out there, and I don't think it's onetime, Matt, is as we grow our RDS business, you do see rev share. The revenue share that we pay to our customers is a big portion and a big percentage that's in SG&A. And so 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 in that, we do believe there was a bit of leverage. Again, it was modest in SG&A for the quarter.

Matthew Bouley

Okay. Got it. And it does explain just the RDS margin as well a little bit. So very helpful there. So secondly, the -- 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.

Jon Adinolfi

Yes, 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 yes, a tough quarter, but we're excited about where we're going in Q4 and beyond.

Operator

Our next question comes from the line of Brian McNamara at Canaccord.

Brian McNamara

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 your current retail DIY customers and brand-new customers.

Jon Adinolfi

Yes. So as I mentioned, over close to 1.5 points of Pro growth, and that is -- 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 points that we're seeing in the resi and the commercial Pro side. I'll start there, but we've seen a number of -- I won't go into each of the details, but we certainly are seeing traction at the Pro level with customers outside of retail that we're seeing traction in fastening as well as even in our glove business, and we're excited about what the resi Pro and our commercial Pro teams 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 Kanebridge, but I'd also be remiss if I didn't mention our Canadian industrial business has had another excellent quarter, really impressed with what that team has been able to do and drive. So that's more about winning with, 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.

Brian McNamara

Great. And then just a quick follow-up on the M&A environment. Obviously, the macro picture has probably not gotten better in the last 3 months since we last spoke. I'm curious what that means for bid-ask spreads and just market activity.

Jon Adinolfi

Yes. We continue to see and fill M&A opportunities. So there are deals in the marketplace. Yes, I think your question is a good one as far as the bid and the ask. I mean, expectations are still, I'll say, moderate right now. So there's still good high-quality businesses that we think we can buy at attractive prices. But it has -- there has definitely been a little bit of a, I'll say, softening in my expectation. So pipeline is filling up. There is still sort of activity there, and we're excited about the 3 deals we did in 2026, and we want to make the right next move. And if it comes up, we'll keep you posted on what it is.

Operator

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.

Jon Adinolfi

Yes. Thank you very much. Well, I appreciate everybody joining today. I want to leave you with 3 elements to remember Hillman by. So first, organic growth, solid in the quarter. We expect that to continue. Really proud of what our team has 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 '27. And then the strategic blueprint proof points, which we touched on a number of points during the call and 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.