Hillman Solutions (HLMN) 2026 年第三季財報電話會議：營收創新高、RDS 成長與更新後的財測指引

重點摘要

• 2026 財年第三季淨銷售額年增 8% 至創公司紀錄的 4.575 億美元。新業務合約貢獻約 5 個百分點，併購 (M&A) 增加 5 個百分點，但部分被核心業績下滑 2 個百分點所抵銷。
• 調整後 EBITDA 成長 2.4% 至創紀錄的 9,020 萬美元。調整後 EBITDA 利潤率下降 100 個基點至 19.7%，反映出關稅實施的時間點與幅度影響。
• 自由現金流從去年同期的 910 萬美元增加至 5,110 萬美元，營運現金流則達到 6,990 萬美元。
• 在推動 MinuteKey 3.5 部署的支撐下，機器人與數位解決方案 (RDS) 部門實現 19% 的銷售成長。在 2026 年安裝了超過 1,700 台機器後，Hillman 在市場上擁有約 4,800 台 MinuteKey 3.5 機台。
• 管理層縮窄 2026 財年淨銷售額預測至 16.6 億至 16.8 億美元，同時維持約 2.85 億美元的調整後 EBITDA 預測以及 1.05 億至 1.15 億美元的自由現金流預測。
• 展望 2027 財年，管理層預計在零售與專業 (Pro) 新業務合約，以及先前已完成併購案帶來的 3%-4% 貢獻推動下，銷售額將成長 8%-12%。公司並未假設總體經濟會帶來順風。

核心財務數據

業務與營運表現

五金與防護解決方案

五金與防護解決方案銷售額成長 5%。併購貢獻約 5 個百分點，新業務合約增加約 2 個百分點（專業與零售通路平均分配）。核心業績則形成 2 個百分點的逆風。

管理層表示，公司在專業通路的市占率持續擴大。預計 2026 年專業通路新合約將貢獻約 1,600 萬美元，約占 Hillman 總銷售成長的 1%。展望 2027 年，管理層預計專業通路新合約將創造超過 3,300 萬美元收益，約占公司成長的 2%。

個人防護業務仍面臨壓力，部分原因在於促銷活動減少。管理層預計情況將在第四季開始改善，並以持平為目標，隨後於 2027 年恢復成長。

機器人與數位解決方案

RDS 銷售額成長 19%，調整後 EBITDA 成長 13%。調整後毛利率為 79%，調整後 EBITDA 利潤率為 30%。

MinuteKey 3.5 是主要的成長動能，特別是在 Hillman 前兩大客戶端，其業務範疇從居家與辦公室鑰匙擴展至汽車鑰匙配製功能。預計於第四季完成對這些客戶的部署。管理層預期第四季將迎來另一個強勁成長期，並指出隨著裝機量成熟，RDS 有望在 2027 年實現雙位數成長。

加拿大地區

加拿大銷售額成長 9%。新業務合約貢獻了 8 個百分點（主要來自專業通路），核心業績則增加 1 個百分點。成長動能包括現有零售客戶的新產品類別，以及與加拿大某大型客戶合作的 Bolt 緊固件計畫。

併購與資本結構

Hillman 完成對 Kanebridge 的併購，該經銷商為工業分銷客戶提供超過 44,000 種緊固件 SKU。管理層表示該業務表現優於預期，但未單獨揭露其部分季度的營收或 EBITDA 貢獻金額。

公司在 2026 年完成了三筆併購案。公司還重組了資本結構，發行 7.35 億美元的 B 類定期貸款、3.75 億美元的資產基底循環貸款 (ABL) 以及後續為 Kanebridge 提供資金的 2 億美元追加定期貸款。定期貸款到期日延長至 2033 年，ABL 則延長至 2031 年。

Hillman 在第三季以平均每股 7.75 美元的價格回購了 63.9 萬股，總金額為 500 萬美元。

管理層財務預測

銷售前景下調是因為市場成交量的改善幅度低於先前預期。管理層表示，新的中位數比先前的成長假設低了約 1.5 個百分點。

展望 2027 財年，管理層預計銷售成長將符合 Hillman 長期 8%-12% 的目標。先前已完成的併購預計將貢獻 3%-4%，而新業務合約預計將從專業通路貢獻超過 2%，並從公司傳統零售業務貢獻超過 2%。

管理層預計 2027 年資本支出將略有增加，主因 Hillman 投資於 HPS、RDS、設施以及分銷網路。計劃中的項目包括新的辛辛那提分銷中心以及 Campbell Chain and Fittings 的設施。

在假設沒有其他重大併購的情況下，管理層預計到 2027 年底淨槓桿率將下降至約 2.5 倍。

風險與關注事項

• DIY（自行動手做）與住宅專業通路需求繼續受到總體經濟環境的壓力。管理層不預期總體經濟背景會在 2027 年轉為順風。
• 成屋銷售已趨於穩定但尚未改善，限制了對更廣泛需求復甦的可見度。
• 關稅實施時間與幅度持續影響利潤率。第三季包含適度的淨關稅相關退款，但大部分被與 232 條款鋼鐵關稅相關的調整所抵銷。
• 隨著 Hillman 跨過前一年實施的調漲基期，預計第四季價格帶來的支撐力道將會減弱。
• 毛利率與 EBITDA 利潤率受季節性影響，第一季與第四季通常低於第二季與第三季。
• 收購 Kanebridge 後淨負債增加，但管理層預計，若未再進行其他重大收購，槓桿率將會下降。

分析師問答亮點

• 2027 年成長結構：管理層澄清，預計 3%-4% 的併購貢獻反映的是已完成併購案滿一年的基期效益，而非未來的交易。專業與零售通路的全新業務合約預計將合計貢獻超過 4 個百分點。
• Kanebridge 定價策略：管理層表示，Kanebridge 過去一向根據市場狀況調整產品定價，並預期其定價方式將繼續因應通膨壓力。
• RDS 經濟效益：Hillman 對 RDS 服務設定的調整後 EBITDA 利潤率目標約為 30%。強勁的 RDS 成長可能會推升財報上的營業費用 (SG&A)，因為給予客戶的分成費用會記錄在該項目中。
• 第四季市場狀況：管理層預期市場仍將是逆風，但第四季可能比第三季略好。新業務成長預計介於 3.5% 以上至高達 5%，且擁有一整個季度的 Kanebridge 營運效益將帶來更顯著的併購好處。
• 併購案源：管理層表示，併購機會依然存在，且賣方的心理預期有所放軟，但 Hillman 將繼續堅持其投資報酬率門檻。

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完整財報電話會議逐字稿

管理層陳述

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.

分析師問答

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.