Cuộc họp công bố kết quả kinh doanh Q3 2026 của Hillman Solutions (HLMN): Doanh thu kỷ lục, tăng trưởng RDS và cập nhật dự báo

Điểm tin chính

• Doanh thu thuần quý 3/2026 tăng 8% so với cùng kỳ năm trước đạt mức kỷ lục 457,5 triệu USD. Các hợp đồng kinh doanh mới đóng góp khoảng 5 điểm phần trăm và hoạt động M&A đóng góp thêm 5 điểm, bị bù trừ một phần bởi mức giảm 2 điểm từ kết quả kinh doanh cốt lõi.
• EBITDA điều chỉnh tăng 2,4% lên mức kỷ lục 90,2 triệu USD. Biên EBITDA điều chỉnh giảm 100 điểm cơ bản xuống 19,7%, phản ánh thời điểm và quy mô của thuế quan.
• Dòng tiền tự do tăng lên 51,1 triệu USD từ mức 9,1 triệu USD của cùng kỳ năm trước, trong khi dòng tiền từ hoạt động kinh doanh đạt 69,9 triệu USD.
• Phân khúc Giải pháp Robot và Kỹ thuật số (RDS) đạt mức tăng trưởng doanh thu 19%, nhờ việc triển khai MinuteKey 3.5. Hillman đã có khoảng 4.800 máy MinuteKey 3.5 trên thị trường sau khi lắp đặt thêm hơn 1.700 máy trong năm 2026.
• Ban lãnh đạo đã thu hẹp dự báo doanh thu thuần năm 2026 xuống 1,66 tỷ - 1,68 tỷ USD, đồng thời duy trì dự báo EBITDA điều chỉnh ở mức khoảng 285 triệu USD và dự báo dòng tiền tự do ở mức 105 triệu - 115 triệu USD.
• Cho năm 2027, ban lãnh đạo dự báo tăng trưởng doanh thu đạt 8%-12%, nhờ các hợp đồng mới ở mảng bán lẻ và Pro cùng đóng góp 3%-4% từ các thương vụ thâu tóm đã hoàn tất trước đó. Công ty không giả định sẽ có yếu tố thuận lợi từ kinh tế vĩ mô.

Dữ liệu tài chính cốt lõi

Kết quả kinh doanh và hoạt động

Giải pháp Phần cứng và Bảo hộ

Doanh thu Giải pháp Phần cứng và Bảo hộ tăng 5%. M&A đóng góp khoảng 5 điểm phần trăm và các hợp đồng mới đóng góp thêm khoảng 2 điểm, chia đều cho mảng Pro và bán lẻ. Kết quả cốt lõi là lực cản giảm 2 điểm.

Ban lãnh đạo cho biết công ty tiếp tục giành thêm thị phần ở kênh Pro. Các hợp đồng Pro mới dự kiến sẽ đóng góp khoảng 16 triệu USD, tương đương khoảng 1% tổng tăng trưởng doanh thu của Hillman trong năm 2026. Cho năm 2027, ban lãnh đạo kỳ vọng các hợp đồng Pro sẽ đem lại hơn 33 triệu USD, chiếm khoảng 2% mức tăng trưởng của công ty.

Mảng kinh doanh thiết bị bảo hộ cá nhân tiếp tục chịu áp lực một phần do hoạt động khuyến mại giảm. Ban lãnh đạo kỳ vọng tình hình sẽ bắt đầu cải thiện trong quý 4 và mục tiêu đạt mức đi ngang trước khi tăng trưởng trở lại vào năm 2027.

Giải pháp Robot và Kỹ thuật số

Doanh thu RDS tăng 19%, trong khi EBITDA điều chỉnh tăng 13%. Biên lợi nhuận gộp điều chỉnh đạt 79% và biên EBITDA điều chỉnh đạt 30%.

MinuteKey 3.5 là động lực tăng trưởng chính, đặc biệt là sự mở rộng từ chìa khóa nhà và văn phòng sang tính năng cho xe hơi tại hai khách hàng lớn nhất của Hillman. Việc triển khai tại các khách hàng này dự kiến hoàn tất trong quý 4. Ban lãnh đạo kỳ vọng một giai đoạn tăng trưởng mạnh mẽ khác trong quý 4 và cho biết RDS có thể đạt mức tăng trưởng hai chữ số vào năm 2027 khi các điểm lắp đặt đi vào ổn định.

Canada

Doanh thu tại Canada tăng 9%. Các hợp đồng mới đóng góp 8 điểm phần trăm, chủ yếu từ kênh Pro, trong khi hoạt động cốt lõi đóng góp 1 điểm. Tăng trưởng bao gồm các nhóm sản phẩm mới tại một khách hàng bán lẻ hiện hữu và chương trình linh kiện kẹp chặt Bolt với một khách hàng lớn tại Canada.

Thâu tóm và Cấu trúc vốn

Hillman đã hoàn tất thương vụ thâu tóm Kanebridge, nhà phân phối lưu kho hơn 44.000 mã sản phẩm (SKU) linh kiện kẹp chặt cho các khách hàng phân phối công nghiệp. Ban lãnh đạo cho biết mảng kinh doanh này hoạt động tốt hơn dự kiến nhưng không công bố riêng đóng góp doanh thu hoặc EBITDA trong một phần quý.

Công ty đã hoàn tất ba thương vụ thâu tóm trong năm 2026. Công ty cũng tái cơ cấu nguồn vốn bằng khoản vay dài hạn B trị giá 735 triệu USD, khoản tín dụng tuần hoàn ABL trị giá 375 triệu USD và khoản vay dài hạn bổ sung 200 triệu USD sau đó để tài trợ cho thương vụ Kanebridge. Thời hạn đáo hạn được gia hạn đến năm 2033 đối với khoản vay dài hạn và năm 2031 đối với ABL.

Hillman đã mua lại 639.000 cổ phiếu với giá 5 triệu USD trong quý 3 với giá trung bình 7,75 USD mỗi cổ phiếu.

Dự báo của ban lãnh đạo

Triển vọng doanh thu đã giảm do sản lượng thị trường cải thiện thấp hơn so với dự kiến trước đó. Ban lãnh đạo cho biết điểm giữa mới thấp hơn khoảng 1,5 điểm phần trăm so với giả định tăng trưởng trước đó.

Cho năm 2027, ban lãnh đạo kỳ vọng tăng trưởng doanh thu nằm trong mục tiêu dài hạn 8%-12% của Hillman. Hoạt động M&A đã hoàn tất trước đó dự kiến đóng góp 3%-4%, trong khi các hợp đồng mới dự kiến đóng góp hơn 2% từ mảng Pro và hơn 2% từ mảng bán lẻ truyền thống của công ty.

Ban lãnh đạo dự kiến chi phí vốn sẽ tăng nhẹ trong năm 2027 khi Hillman đầu tư vào HPS, RDS, nhà xưởng và mạng lưới phân phối. Các dự án trong kế hoạch bao gồm trung tâm phân phối mới tại Cincinnati và cơ sở sản xuất Campbell Chain and Fittings.

Giả định không có thêm thương vụ M&A đáng kể nào, ban lãnh đạo dự kiến đòn bẩy thuần sẽ giảm xuống khoảng 2,5x vào cuối năm 2027.

Rủi ro và yếu tố cần theo dõi

• Nhu cầu DIY và Pro mảng nhà ở tiếp tục chịu áp lực từ môi trường kinh tế vĩ mô. Ban lãnh đạo không kỳ vọng bối cảnh vĩ mô sẽ trở thành yếu tố thuận lợi trong năm 2027.
• Doanh số bán nhà hiện hữu đã ổn định nhưng chưa cải thiện, làm hạn chế khả năng dự báo về sự phục hồi nhu cầu trên diện rộng.
• Thời điểm và quy mô ảnh hưởng của thuế quan tiếp tục tác động đến biên lợi nhuận. Quý 3 bao gồm khoản hoàn thuế thuần khiêm tốn liên quan đến thuế quan, nhưng phần lớn bị bù trừ bởi các điều chỉnh gắn liền với thuế thép theo Mục 232.
• Tác động từ giá bán dự kiến sẽ bớt thuận lợi hơn trong quý 4 khi Hillman so sánh với đợt tăng giá đã thực hiện trong năm trước.
• Biên lợi nhuận gộp và biên EBITDA theo yếu tố mùa vụ thường thấp hơn trong quý 1 và quý 4 so với quý 2 và quý 3.
• Nợ thuần tăng sau khi thâu tóm Kanebridge, mặc dù ban lãnh đạo dự kiến sẽ giảm nợ nếu không thực hiện thêm thương vụ thâu tóm đáng kể nào khác.

Nội dung nổi bật từ phần Hỏi & Đáp với chuyên viên phân tích

• Cơ cấu tăng trưởng năm 2027: Ban lãnh đạo làm rõ rằng mức đóng góp 3%-4% dự kiến từ M&A phản ánh sự tròn năm của các thương vụ thâu tóm đã hoàn thành, không phải các giao dịch trong tương lai. Các hợp đồng mới dự kiến đóng góp tổng cộng hơn 4 điểm trên cả mảng Pro và bán lẻ.
• Chính sách giá của Kanebridge: Ban lãnh đạo cho biết Kanebridge trong lịch sử luôn điều chỉnh giá sản phẩm theo điều kiện thị trường và kỳ vọng phương pháp định giá này sẽ tiếp tục ứng phó với áp lực lạm phát.
• Hiệu quả kinh tế mảng RDS: Hillman đặt mục tiêu biên EBITDA điều chỉnh khoảng 30% cho các dịch vụ RDS. Tăng trưởng RDS cao hơn có thể làm tăng chi phí SG&A được báo cáo do chi phí chia sẻ doanh thu với khách hàng được ghi nhận vào khoản mục đó.
• Bối cảnh quý 4: Ban lãnh đạo dự kiến thị trường vẫn là lực cản, mặc dù quý 4 có thể tốt hơn một chút so với quý 3. Tăng trưởng từ các hợp đồng mới dự kiến dao động từ trên 3,5% đến 5%, cùng lợi ích M&A lớn hơn từ việc sở hữu Kanebridge trong trọn một quý.
• Cơ hội M&A tiềm năng: Ban lãnh đạo cho biết các cơ hội thâu tóm vẫn hiện hữu và kỳ vọng của bên bán đã giảm bớt phần nào, nhưng Hillman sẽ tiếp tục áp dụng các ngưỡng tỷ suất sinh lời của mình.

Toàn văn biên bản cuộc họp kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

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.