Hillman (HLMN) Q4 2025 Earnings Call Transcript

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DATE

Tuesday, February 17, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Jon Michael Adinolfi
• Chief Financial Officer — Michael Edward Francis (Rocky)
• Vice President of Investor Relations and Treasury — Michael Koehler

TAKEAWAYS

• Net Sales -- $1,552,000,000 for the year, up 5.4%.
• Adjusted EBITDA -- $221,753,000 for the year, a 13.9% increase.
• 2026 Net Sales Guidance -- Range of $1,600,000,000–$1,700,000,000, with midpoint growth of 6.3%.
• 2026 Adjusted EBITDA Guidance -- Range of $275,000,000–$285,000,000, with a midpoint growth of 1.7%.
• Free Cash Flow Guidance for 2026 -- $100,000,000–$120,000,000, midpoint $110,000,000 (>90% adjusted net income conversion).
• Key 2025 Revenue Drivers -- Price added 5.5 percentage points, InTech DIY acquisition contributed three points, new business wins added two points, offset by roughly 5% decline in market volumes.
• HPS Segment -- Hardware and Protective Solutions net sales grew 7.8% to $1,200,000,000; adjusted EBITDA rose 26% to $196,300,000.
• RDS Segment -- Robotics and Digital Solutions net sales up 1.6% to $220,200,000; adjusted gross margin at 73%, adjusted EBITDA margin at 30%.
• Canada Segment -- Net sales declined 0.6%, with adjusted EBITDA margin just under 10% and FX as a more than two-point headwind.
• Adjusted Gross Profit Margin -- 48.7% for the year, up 60 basis points; Q4 margin at 47.6%, down 10 basis points year over year, with sequential step-down as expected.
• Adjusted SG&A -- Full-year adjusted SG&A as a percentage of sales was 31%, improved from 31.6%; Q4 increased to 31.8% from 31.5%.
• Adjusted EBITDA Margin -- 17.7% for the year, up from 16.4% in 2024; Q4 margin 15.8% versus 16.1% prior-year quarter.
• Operating Cash Flow -- $105,000,000 for the year, impacted by approximately $65,000,000 in tariff-related effects.
• Free Cash Flow (2025) -- $35,100,000, down from $98,100,000 in 2024, reflecting tariff impact.
• Net Debt -- $665,800,000 at year-end, down by $8,000,000 from 2024; net debt to EBITDA improved to 2.4x (from 2.8x).
• 2025 CapEx -- $70,000,000, decrease attributed to slowing MinuteKey 3.5 investments.
• Share Repurchases -- Bought back 1,400,000 shares for $12,400,000 at an average price of $9.07 per share.
• 2026 CapEx Guidance -- $70,000,000–$75,000,000, guided to continue MinuteKey 3.5 expansion and merchandising investment.
• 2026 Gross Margin Guidance -- 46%–47%, down due to full normalization of tariff pricing and costs.
• Liquidity -- $306,000,000 at year-end, with $279,000,000 available under revolver and $27,000,000 in cash.
• Pro Segment Focus -- New team assembled to grow more than $400,000,000 in pro-related business; increased strategic emphasis noted.
• M&A Activity -- Pipeline described as healthy; expectation to complete one or two bolt-on deals in 2026.
• MinuteKey 3.5 Rollout -- 1,800 new kiosks installed in 2025, nearly 3,500 machines in field; further rollout with another major customer by 2026.
• Adjusted Gross Margin Seasonality (2026) -- Expected below 46% in Q1, stepping up in Q2, with high end reached in second half.

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RISKS

• Persistent macro headwinds, including a continued weak existing home sales market, with 4,060,000 units (unchanged at thirty-year lows), described as "a headwind to home improvement projects."
• Free cash flow materially reduced in 2025 to $35,100,000, driven by $65,000,000 in negative tariff impact.
• 2026 adjusted EBITDA growth guidance of 1.7% at midpoint signals margin normalization and a more difficult year-over-year comparison.
• Canadian business faced market pressure with net sales down and FX headwind exceeding two points; adjusted EBITDA margin fell just short of 10%.

SUMMARY

Hillman Solutions Corp. (NASDAQ:HLMN) reported all-time high annual net sales and adjusted EBITDA, citing effective pricing execution, InTech DIY acquisition impact, and share gains through new business wins. Management provided 2026 guidance that anticipates revenue growth driven by pricing carryover, ongoing new wins, and continued investment in the MinuteKey 3.5 rollout, with gross margins guided to normalize due to full tariff effect. Capital allocation priorities include steady internal investment, targeted share repurchases, and renewed focus on mergers and acquisitions, particularly in the pro segment.

• Share buyback activity in 2025 averaged a price of $9.07 per share, reflecting ongoing efforts to offset equity dilution and capitalize on opportunities.
• The timing of price increases versus tariff costs led to elevated profitability and margins in the latter part of 2025, with these benefits expected to be fully normalized in reported results going forward.
• Leadership indicated that gross margin cadence in 2026 will start below guidance in Q1, rising sequentially, with highest levels expected in the second half as inventory costs cycle through.
• Management described the M&A environment as improved versus prior quarters, with some previously paused opportunities returning; one to two bolt-on deals are likely in 2026.
• The company will provide further strategic and long-term target updates at its inaugural Investor Day scheduled for March 19.

INDUSTRY GLOSSARY

• MinuteKey 3.5: The latest generation of Hillman's self-service key duplication and engraving kiosk, featuring enhanced hardware and "endless aisle" digital product capabilities.
• Pro: Refers to professional contractors and trades customers targeted by Hillman’s dedicated business segment and sales initiatives.
• Channel Inventory Balancing: Periodic adjustments in the amount of product held by distributors or retailers, typically to align stock levels with end-user demand or to prepare for new product introductions.
• FX Headwind: Negative impact on financial results caused by adverse changes in foreign exchange rates, particularly relevant to the company’s Canadian operations.

Full Conference Call Transcript

Michael Koehler: We want to introduce you to the Hillman Group. Who we are, what we do, and the customers we serve. Founded in 1964, in Cincinnati, Ohio, the Hillman Group is a leading provider of hardware-related products and solutions to home improvement, hardware, and farm and fleet retailers across North America. Hillman’s products include hardware solutions, like fasteners, screws, nuts, and bolts, protective solutions like work gloves, job site storage, and protective gear, and robotic and digital solutions like key duplication, auto key solutions, and tag engraving. Hillman distributes over 100,000 SKUs through its vast distribution network to its customers’ retail locations and distribution hubs across North America.

Hillman has differentiated itself with its competitive moat built on direct-to-store shipping capabilities, a dedicated in-store sales and service team, and over sixty years of product and industry experience. Renowned for its commitment to customer service, the team. Team. And service. Built on its legacy of service, Hillman believes that the building never stops. We want to introduce you to the Hillman Group. Who we are, what we do, and the customers we serve. Founded in 1964 in Cincinnati, Ohio, the Hillman Group is a leading provider of hardware-related products and solutions to home improvement, hardware, and farm and fleet retailers across North America.

Products include Hillman’s hardware solutions like fasteners, screws, nuts and bolts, protective solutions like work gloves, job site storage, and protective gear, and robotic and digital solutions like key duplication, auto key solutions, and tag engraving. Hillman distributes over 100,000 SKUs through its vast distribution network to its customers’ retail locations and distribution hubs across North America. Hillman has differentiated itself with its competitive moat built on direct-to-store shipping capabilities, a dedicated in-store sales and service team and over sixty years of product and industry experience. Renowned for its commitment to customer service, Hillman regularly earns vendor of the year awards from its customers for delivering value and service.

Built on its legacy of service, Hillman believes that the building never stops. We want to introduce you to the Hillman Group, who we are, what we do, and the customers we serve. Founded in 1964, in Cincinnati, Ohio, the Hillman Group is a leading provider of hardware-related products and solutions to home improvement. Hardware, and farm and fleet retailers across North America. Hillman’s products include hardware solutions, like fasteners, screws, nuts and bolts, protective solution

Operator: Good morning.

Operator: And welcome to the fourth quarter and full year 2025 results and 2026 guidance presentation for Hillman Solutions Corp. My name is Liz, and I 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 and earnings presentation were issued this morning. Documents and a replay of today’s presentation can be accessed on Hillman’s Investor Relations website at ir.hillmangroup.com. I would now like to turn the call over to Michael Koehler with Hillman. Thank you, operator. Good morning, everyone, and thank you for being with

Michael Koehler: us for our earnings call. I am Michael Koehler, Vice President of Investor Relations and Treasury. Joining me on today’s call are Hillman’s President and Chief Executive Officer, Jon Michael Adinolfi, or JMA as we call him.

Michael Edward Francis: And our Chief Financial Officer, Rocky Krafts. I would like to remind our audience that certain statements made today may be considered forward-looking and are subject to safe harbor provisions of applicable securities laws. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, assumptions, and other factors, many of which are beyond the company’s control and may cause actual results to differ materially from those projected in such statements. Some of the factors that could influence our results are contained in our periodic and annual report filed with the SEC.

For more information regarding these risks and uncertainties, please see slide two in our earnings call slide presentation, which is available on our website. In addition, on today’s call, we will refer to certain non-GAAP financial measures. Information regarding our use of and reconciliations of these measures to our GAAP results are available in our earnings call slide presentation. JMA will begin today’s call by providing some commentary on our full year 2025 results, briefly introduce our 2026 guidance, and then discuss our performance for the year by business. Rocky will then provide a more detailed walk through our 2025 financial results and our ’26 guidance before turning the call back to JMA for some closing comments.

Then we will open the call up for your questions. It is now my pleasure to turn the call over to our President and CEO, Jon Michael Adinolfi. JMA? Thanks, Michael. Good morning, everyone, and thank you for joining us. Let me start by saying how proud I am that the Hillman team successfully navigated the impact of tariffs in this dynamic environment during 2025. The entire organization worked extremely hard taking care of our customers during the year, and our team rose to the occasion to put the best year in this company’s sixty-two year history, delivering record net sales and adjusted EBITDA.

In 2025, net sales increased 5.4% to $1,552,000,000, and adjusted EBITDA increased 13.9% to $221,753,000 versus 2024. We are pleased with our results for 2025, and remain focused on the growth opportunities that lie ahead. Looking to 2026, we estimate full year 2026 net sales will be between $1,600,000,000 and $1,700,000,000. The midpoint of $1,650,000,000 represents top-line growth of 6.3% compared to 2025. Additionally, we expect to generate between $275,000,000 and $285,000,000 of adjusted EBITDA for 2026. The midpoint of $280,000,000 represents growth of 1.7% compared to 2025. And finally, we expect to deliver free cash flow between $100,000,000 and $120,000,000 for 2026. The midpoint of $110,000,000 reflects a 90% plus conversion of adjusted net income into free cash flow.

The main contributor to our top line growth during 2026 will be the rollover

Jon Michael Adinolfi: from pricing that went into effect during 2025. Our sales team is focused on winning new business, and we are confident that new business wins during 2026 will outpace last year. As for the markets, we are yet to see any meaningful changes in the macro that could produce tailwinds for Hillman, and therefore, do not expect any help from the market this year. Rocky will provide more details on our guidance shortly. But for now, let us turn back to our financial highlights for 2025. Net sales for 2025 increased by 5.4%, or $80,000,000, over 2024, even during a challenging market.

Driving the increase in net sales was three-point contribution from InTech DIY, which we acquired in August 2024, a two-point contribution from new business wins as we continue to steadily win new business and take market share. Price contributed 5.5 points in growth during the year, which covered the higher cost resulting from tariffs. Partially offsetting these were market volumes, which were down about 5% in 2025. Existing home sales remain soft, and unchanged from the thirty-year lows we saw during 2024, totaling 4,060,000. This figure is well below the average of 5,000,000 existing home sales per year over the last ten years.

We believe this number of existing home sales is a headwind to home improvement projects, which impacts our sales. That said, during the year, we grew our top line to a record high. This is a testament to our resilient business model and the hardworking folks at Hillman and strong partnerships we have with our customers. Turning to the bottom line, our record adjusted EBITDA for 2025 increased by $33,600,000 to $275,300,000, marking an increase of 13.9% over 2024. This puts our compounded annual growth rate for adjusted EBITDA since coming public at over 7%. The increase was driven by the timing of price increases and tariff cost hitting our income statement.

For most of the second half of the year, we had price increases in place, which lifted our top line. At the same time, we had pre-tariff and thus lower-priced goods flowing through our income statement. The results were record margins and outsized earnings. This benefit peaked in the third quarter, moderated in the fourth, and will be fully normalized in 2026. Another main contributor to our record profit were our global supply chain and operations team. We are running this business efficiently and effectively. We are taking care of our customers, shipping orders on time and in full, and delivering fill rates that are as high as I have seen in my six plus years with Hillman.

Now let us drill down by business segment. Hardware and Protective Solutions, or HPS, is our biggest business and delivered excellent results during 2025. HPS net sales increased 7.8% to $1,200,000,000, while adjusted EBITDA increased by 26% to $196,300,000. Driving this strong performance were our outstanding sales and service teams, which successfully managed pricing for tariffs while executing new business wins in PowerPro screws and rope and chain, to name a few. Leveraging our moat with our long-term retail partners drives consistent performance and growth regardless of macro market conditions. Robotics and Digital Solutions, or RDS, returned to growth during 2025. Net sales increased 1.6% to $220,200,000 when compared to last year.

Operator: During

Jon Michael Adinolfi: 2025, we installed over 1,800 MinuteKey 3.5 kiosks, and we continue to be pleased with the performance of these new machines. We completed the rollout with one of our top customers before the end of 2025, and expect to complete the rollout with another top customer by 2026. The rollout is tracking to our expectations, and we are pleased so far. The enhanced capabilities of these machines, including auto key duplication and endless aisle, are driving comparable net sales increases versus older generation machines. As of today, we have nearly 3,500 MinuteKey 3.5 machines in the field, and we feel really good about the business and how it is positioned for 2026.

Adjusted gross margins and adjusted EBITDA margins were both near historical norms, totaling 73% and 30%, respectively. Turning to Canada, net sales in our Canadian business were down 0.6% compared to the prior year. New business wins were partially offset by another quarter of soft market volumes, and FX was over a two-point headwind. Adjusted EBITDA margins came in just shy of 10% in Canada for the year. This Hillman team executed very well during 2025, and I am proud of the team for their performance. Looking to 2026, we will continue to control the controllables. Our teams are performing at a high level, and we will continue to win with our customers and in the market.

The M&A pipeline is healthy. We have several exciting bolt-on acquisition opportunities that we are working on. We continue to invest in taking great care of our customers and delivering increased value to our stakeholders. We are confident we will capitalize on the opportunities ahead of us as we expand our focus on the pro. This will broaden our go-to-market channels, diversify our customer base, and provide meaningful white space for growth. We have recently assembled an experienced team with deep pro knowledge that is focused on growing our pro business. We are confident we have the right to win and are excited about the opportunities in this channel.

We look forward to providing you our detailed plans to win the pro during our first Investor Day which will be held next month on March 19. With that, I will turn it over to Rocky to talk financials and guidance. Rocky?

Operator: Thanks, JMA.

Jon Michael Adinolfi: Let us start with our fourth quarter and year-end results before I get into our guidance for 2026. Fourth quarter 2025 net sales increased 4.5% to $365,100,000 versus the prior-year quarter. 2025 full-year net sales totaled $1,552,000,000. Fourth quarter adjusted gross profit margins were 47.6%, which stepped down sequentially as expected. Compared to last year, margins were down 10 basis points. For the full year 2025, adjusted gross profit margin increased 60 basis points to 48.7% from 48.1% during 2024. Adjusted SG&A as a percentage of sales for Q4 2025 increased to 31.8% from 31.5% during the year-ago quarter. For the full year 2025, adjusted SG&A as a percentage of sales decreased to 31% from 31.6%.

Adjusted EBITDA in the fourth quarter increased 2.3% to $57,500,000. Adjusted EBITDA for 2025 increased 13.9% to $275,300,000. Our adjusted EBITDA to net sales margin during the quarter was 15.8%, which compares to 16.1% a year ago. Adjusted EBITDA to net sales margin for the full year was 17.7%, which compares favorably to 16.4% a year ago. Now turning to our cash flow and balance sheet. During 2025, operating activities generated $105,000,000 versus $183,000,000 in 2024. Impacting our operating cash flow and therefore free cash flow was about $65,000,000 of tariff impact. Free cash flow for the year totaled $35,100,000, which included the $65,000,000 of tariff impact versus $98,100,000 in 2024.

We ended the year with $665,800,000 of net debt outstanding versus $674,000,000 at the end of 2024, an improvement of $8,000,000. Liquidity available totaled $306,000,000, consisting of $279,000,000 of available borrowing under our revolving credit facility, and $27,000,000 of cash and equivalents. At the end of the year, our net debt to trailing twelve-month adjusted EBITDA ratio was 2.4x, which improved from 2.8x at the end of 2024. Our strong balance sheet allows us to play offense. We can invest into organic growth opportunities, execute M&A, and be opportunistic when it comes to using our balance sheet to add stockholder value. Let me turn to capital allocation.

During 2025, we invested $70,000,000 in the form of CapEx back into the business. This compares to $85,000,000 in 2024. The decrease is a result of our MinuteKey 3.5 investments slowing. During 2024 we had an accelerated capital spend to build MinuteKey 3.5 machines that were placed in the field during 2025. We continue to build and retrofit machines but the pace of capital spend has moderated. Additionally, during 2025, we invested $12,400,000 to buy back 1,400,000 shares of stock at an average price of $9.07 per share. Let me now talk about our 2026 guidance.

Michael Koehler: Will be a combination of new business wins and a mid-single-digit contribution from price. The high end of our guide assumes that market volumes are flat, and the low end of our guidance assumes that market volumes step down from where they were in 2025. There are a lot of variables that drive our top line performance, but as we have seen over the last twenty years, we usually see mid-single-digit growth on our top line. We expect the same for 2026. Going forward, we will not provide explicit price and market volume performance on a quarterly basis. We will stay away from providing quarterly specifics on price for competitive reasons in order to protect our customers.

For our bottom line, we expect full year 2026 adjusted EBITDA to total between $275,000,000 and $285,000,000. The midpoint of $280,000,000 represents an increase of 1.7% versus 2025. As we have talked about, we expect margins to normalize following robust results in 2025, which will prove to be a difficult comp. The result is that we expect our 2026 net sales growth to outpace our 2026 adjusted EBITDA growth. We expect our full-year adjusted gross margins to be between 46%–47% for 2026. The step down from last year is the result of tariff pricing and costs being fully realized in the P&L. This will result in margins being fully normalized starting in 2026.

Lastly, free cash flow during 2026 is expected to come in between $100,000,000 and $120,000,000 with a midpoint of $110,000,000, which reflects a 90% plus conversion of adjusted net income. We expect to invest between $70,000,000 and $75,000,000 of CapEx into our business in 2026, which is comparable to our 2025 spend. We continue to make necessary investments into the expansion of our MinuteKey 3.5 fleet as well as invest in merchandising solutions across our customer base. For 2026, we expect to continue repurchasing stock under our stock repurchase program. Our objective remains to offset any dilution caused by employee equity grants and opportunistically buy back stock. Excluding M&A, we expect we will end 2026 around 2.1x levered.

This assumes that we fall near the midpoint of our guidance and that 2026 is a somewhat uneventful year, unlike 2025 when we had to deal with tariffs. During 2026, we expect to use cash and our leverage will likely tick up as we build inventory to support our busy spring and summer seasons. This is typical for Hillman in a normal year. Following Q1, we expect to generate free cash flow during each of the remaining quarters of 2026. Hillman is in a great position to build on the success we had in 2025 and we are confident we can achieve the targets we have laid out for you today.

Our focus remains taking great care of our customers while growing the top and bottom lines of our business. With that, let me turn it back to JMA. Thanks, Rocky. We are optimistic about the year ahead and energized to keep pushing forward. We expect to grow share and achieve solid revenue and earnings gains throughout 2026. Our unwavering focus is on taking care of all of our stakeholders—customers, suppliers, team members, and investors—and we will work diligently to deliver on that responsibility. We look forward to updating you during the year with our progress. With that, we will begin the Q&A portion of our call. Operator, please open the call for questions.

Operator: Press 11 on your telephone, and wait for your name to be announced. To withdraw your question, please press 11 again. We ask that you limit yourself to two questions and rejoin the queue for any additional questions. Our first question comes from Lee Jagoda with CJS Securities. Line is now open. Hey. Good morning.

Jon Michael Adinolfi: Morning, Lee. Where are Lee? Rocky, can we just—I know you gave the full year gross margin

Operator: expectations. Can you kind of walk through the cadence of the gross margins? And I guess, given

Michael Koehler: here. Heading into the, you know, Q2 spring busy season.

Operator: Secondarily, we actually have, in the first quarter, we will probably have the highest-cost inventory flowing through the system that we probably had in the history of Hillman just given the timing of where receivables were last year and the timing of flowing through. So I would expect that we will be slightly below that 46%–47% in the first quarter. Should see it step up sequentially in Q2. And in the back half, I would expect we will be at the high end of that range as we think about the second half of the year.

Lee Jagoda: You were talking pretty positively on new business

Operator: Got it. And then—and then, Rocky, I think you

Lee Jagoda: wins and looking for them to be higher year over year in ’26 versus ’25. Can you talk to kind of what gives you the confidence there? How much of the new business wins anniversary, you know, on stuff that you have already started to load in ’25? And then on the stuff that is not anniversarying, what have you won already, and what should we be looking forward to?

Operator: Sure. I am going to throw that over to JMA and let him comment. Alright. Thanks, Rocky. Yeah. We are excited for several reasons. First off, we have got a solid set of initiatives this year. We have some nice wins that we are building off of in ’25 that will cascade into ’26, to your point. I am really fired up because we have actually national sales meeting this coming week, Friday, Saturday, Sunday in Colorado. So we will be in Denver with 300 of our sales folks getting really fired up about the year. We have got some great new products. We have got business development.

While it was a core function inside of Hillman, we have actually grown and invested that. We have got a business development team that is focused on a number of our brands where we have got some exciting products and then the pro. You heard us sprinkle a little bit of that into the presentation, but, you know, the real exciting thing is we are actually here this week in Orlando for the International Builders Show. We are actually broadcasting live from here. We have got our booth. We have got PowerPro. We have got a lot of great pro product that we are showing off.

And our business is over, you know, $400,000,000 of it is pro, and we are really fired up about the team that we have assembled that is driving it. So we have got a lot of reasons to be confident that we are going to go win new business in a tough environment in ’26, and we look forward to talking more about that when we are together on March 19 for Investor Day.

Lee Jagoda: Great. Thanks very much.

Operator: Thanks, Lee. Thanks, Lee. Appreciate it.

Michael Koehler: Our next question comes from W. Andrew Carter from Stifel. Your line is now open.

Operator: Thank you. Good morning. I wanted to ask about the deterioration in sales

Jon Michael Adinolfi: Protective Solutions. Correct me if I am wrong. That is the business that can be subject to some channel load because it goes through the DCs. But anything else going on there besides just some near-term dynamics? Thanks.

Operator: Hey, Andrew. Thank you. Yeah. I mean, near-term dynamics, I think, is probably the right way to think about it. Yeah. There is a little bit of a channel inventory balancing that we went through in the fourth quarter. That business actually has quite a few new products coming out in 2026, so we feel good about the trajectory as we move forward. We have also successfully integrated our Intex DIY business, and that platform is performing pretty well in a tough market. So nothing else to really share at this point. Rocky, unless you had any—No.

I mean, again, as we have said many times, that business is more subject to timing around when products launch, when they come into the market, if—when, you know, like off-shelf activities are happening. And so I think that is what we saw in the fourth quarter. And we think as we, you know, as you go into ’26, it should be growing like the rest of the business.

W. Andrew Carter: Thanks. Second question, to kind of think about RDS. And kind of the machine rollout, you also have customer transition in that business. You quantify the headwind from that customer transition—did that peak in 4Q? Therefore, it slows during next year. Anything else to help with modeling, or how to frame expectations on RDS? Thanks.

Operator: Yeah. The customer transition, Andrew, will continue between Q1 and Q2, and then we will anniversary that, and that will be behind us finally. So that would be one way to think about that as you are putting your numbers together for 2026. I think the big thing with that business is 3.5 rollouts, as we—as I have, you know, framed in my prepared comments, is actually doing well. Our RDS team and our field teams are doing a great job.

We have actually been out in the field now that we have got scale in several markets, really focusing on driving the business, fine-tuning the technology, which we feel really good about, and we are confident that business will continue to grow after putting up a year of growth in ’25. We will build on that in 2026. So, we are excited about where that business is moving to, and we look forward to reporting more as those results come in

W. Andrew Carter: Thanks. I will pass it on.

Operator: Thanks, Andrew. Appreciate it, Joe.

Michael Edward Francis: As a reminder, if you would like to ask a question at this time, please press 11 on your touch-tone phone. Our next question comes from Stephen Volkmann. With 2026, we are sort of transitioning to what we might

Stephen Volkmann: consider sort of a more normal year from an operating perspective. So I am trying to think about leverage when things do start to come back. So what is the right way—if those existing home sales come back that you talked about, JMA—to think about sort of the incremental EBITDA margin, sort of based on where we are starting from here?

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

Stephen Volkmann: Okay. Thank you. And then any thoughts on sort of Canada as we model 2026?

Operator: Yeah. I think Canada is still under a fair amount of pressure. We actually have our sales team up there really fired up about the new year. We have got some exciting things we are doing in pro and other areas. So, not a lot more detail to go into there. We think that economy, as we get through into the spring season, will be better. So we expect that the return to growth in ’26.

Stephen Volkmann: Okay. Thank you.

Michael Edward Francis: Our next question comes from David John Manthey with Baird. Line is now open.

Stephen Volkmann: Thank you. Yeah. Good morning, guys. Good morning, David.

Jon Michael Adinolfi: First off, on the sort of the long-term

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

Operator: Yeah. Hey, Dave. It is Rocky. I think you hit the nail on the head. When you talk about—we would have expected coming out of the IPO that RDS would have been a bigger growth driver. And because of that, you would have seen higher growth relative to EBITDA from an organic perspective. Again, 7% if you look back since the IPO compounded growth in EBITDA in the business, which we feel pretty good about. I think what I would say is, in March, we are going to do our first Investor Day. I think you are going to hear us at Investor Day talk a lot about those longer-term targets.

I do not think it is going to be a revolution. It will be an evolution of those targets, but I think we are going to give you the building pieces about how we think about the business, how we think about it over the next three to five years. And I really do not want to steal the thunder, as you can imagine today, from Investor Day. So I look forward to talking to everyone about that.

David John Manthey: Yeah. Fair enough. And, minor point here, but we are starting to hear out in the market about chip shortages. And I do not know if that is the same type of chips that you guys use in your machines. But how are you situated relative to supply, versus your growth goals in RDS and the MinuteKey 3.5?

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

David John Manthey: Great. Thanks very much.

Operator: Thanks, Dave.

Michael Edward Francis: Our next question comes from Brian Christopher McNamara with Canaccord Genuity. Your line is now open.

Brian Christopher McNamara: Hey. Good morning, guys. Thanks for taking the question. Just had a question on the guidance overall. I think it implies a bit of a step down. I think you

Jon Michael Adinolfi: prior—prior gave a

Brian Christopher McNamara: directional guidance of plus high single to plus low double digits. And I think you are at plus six at the midpoint. Just trying to figure out what drove the change there.

Operator: Yeah. I think, Brian, it is Rocky. I mean, you know, obviously, the fourth quarter was a little softer than we expected. And we would tell you even early in the year, what we saw in January and what we have seen because of weather in February has been a little softer, probably than we would have anticipated. And so we are going to come out with conservative guide given just what we have seen in the markets. It kind of puts you down a few points.

We are not going to give exact guidance, but if you think about the midpoint, which if, you know, you go back a few quarters ago when we talked about directional guidance, we talked about a flat market. That was the hypothetical that we used to get to the high single or the low double digits. And so if you assume, you know, a few points down in market, that gets you down to kind of a mid-single-digits kind of number at the midpoint.

Brian Christopher McNamara: Great. That is helpful. And then second, is there, like, a magic existing home sales number where it would meaningfully impact your business? You know, we are at, you know, 4.1 right now. January is a rough month. Anything where you are like that number, you know, our business starts to hum along a little bit better?

Operator: Right. I do not know that there is a magic number, but we do, you know, we do like—in the mid four to five feels like the right, you know, better spot for us where you will see some of that home improvement, whether putting houses on the market or you are looking to buy a house and you are making some, you know, some modifications to it. So that is really where we would like to be. So I do not know if there is really a sweet spot, if you will, but we would like to see a bit of improvement from where we are today.

Our repair and maintenance side of our business is actually humming along pretty nice. Just love to see a little bit more of that, you know, get houses ready and also, you know, getting homes ready to be lived in, if you will. We will see a little benefit in that one group. So stay tuned, but we are excited to capitalize on that. It is why we are excited about the pro side of our business as well.

Brian Christopher McNamara: Great. And if I could just squeak in one last one on M&A. It sounds like you guys are—it sounds like you are a little more constructive on the M&A environment. I am just curious how that environment looks relative to last year. I am assuming a lot of talks were kind of paused because of tariffs and policy uncertainty. Is it just a function of maybe some targets coming back to the table? Is it new opportunities or anything you could—more color there would be helpful. Yeah. You guys.

Operator: Yeah. We are more excited now than we were last quarter or the quarter before that. So I think, you know, we feel confident we will do, you know, one to two deals in 2026. So we are excited about what we see in front of us. To answer your question where they are coming from, it is—there are, you know, some opportunities that are coming back to the table that were put on pause. We are also seeing some new ones, and we see some activity and definitely more M&A opportunities coming our way.

So our M&A team is actually quite busy right now, looking at a lot of deals, and we are excited about what is in front of us.

Brian Christopher McNamara: Excellent. Thank you, guys.

Operator: You are welcome. Thank you.

Michael Edward Francis: This concludes the Q&A portion of today’s call. I would like to turn the call back over to Mr. Adinolfi for some closing comments.

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

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