Madison Callinan: Good morning. This is Madison Callinan on for Brian. Thanks for taking your questions. First, could you provide any additional color on – like new business wins? I know you mentioned rope and chain, but like any other product categories or specific retailers, just a little bit more color would be helpful? Thanks.
Douglas Cahill: Yes, I think we’ve got three wins, one in rope and chain accessory, one in gloves, and one in deck screw area. And so the two of the three will be when we started them in the second half of the year, so you’ll get the benefit of that as it goes into 2024. The deck screw one will be a rollout. We’ve also, Jon maybe talk about, you know, kind of how we plug away with hardware, an example of what happens each year in stores plus new store openings, maybe talk about that for a second.
Jon Adinolfi: Absolutely, yes we’re excited about 2024. We feel like we have quite a bit of growth opportunity in front of us in our traditional hardware channel where we serve you know close to 15,000 outlets. We have tremendous amount of opportunity. We’ve got a number of wins that Doug referenced there that are starting to, we’re starting to feel in the back half of this year, which will help us next year. A chain of stores in Florida, we’ve got some in the Midwest, we’ve got actually a pretty good sized target in the Northeast. So, we’re excited about 2024 and the opportunities in the hardware chain. And that’ll be across all categories in many of those stores. So it really helps the entire common business.
Douglas Cahill: Madison, we also have, and that’s not in the number we gave you, but we also have the new Quick Tag 3 pet engraving machine that’s going into one of our major customers with every new remodel, and there’s 400 or 500 of those going in. We have the new 3.5 MinuteKey, which is to take what is office and home self-serve and now provide the consumer an opportunity to do Smart Fob and Transponder and RFID, and that will be growth opportunities. I think that last one, the 3. 5 MinuteKey, is really going to be second half of ’24 because we want to make sure the consumer experience is really good in that regard and we’re taking care of the back end. The retailer is essentially not doing the work. We’re doing it for them.
[technical difficulty] And the retail is excited. Retail is really excited, because they’re used to 399 key, and now we’re going to do an $80 FOB for them. So that should be also growth for us next year. But we want to be very cautious how we do that, because we don’t want the consumer to get excited and then not be able to come through with the service on the backside.
Madison Callinan: Great. Thanks so much. And then just secondly, if you could expand upon like how you’re maintaining or gaining market share even as the market flows kind of based off of, you know, your commitment to retailers during the supply chain challenges where you have strong fill rates? Thanks.
Jon Adinolfi: Yes, for us, I mean, we’re capitalizing, to your point, on the performance that Hillman’s delivered over the last several years. And that’s really some of the wins that we see in hardware. And I mean, I’d have to really go back to Rope and Chain that Doug mentioned earlier. That’s a perfect example where we expand into a category where we were before. We actually successfully launched it early and we continue to build some momentum. We expect to take that, I’ll say category strength to other customers. So, we’re going to continue to build on the momentum we have and the categories that we serve today and continue to expand into categories where we’re not. So, we’re really excited about 2024 in that area.
Madison Callinan: Great, thanks so much, guys.
Douglas Cahill: Sure.
Operator: Thank you. One moment for our next question. And that will come from the line of Brian Butler with Stifel. Your line is open.
Brian Butler: Hi. Good morning. Thanks for taking my questions.
Douglas Cahill: Hi, how you doing, Brian?
Brian Butler: Very good. Very good. I guess, well, back on the 24, when you think about the inventory benefit that’s in ’23 guidance, how much is that? And then when you look at ’24, how much of a headwind is that and how do you overcome it?
Douglas Cahill: Yes, Brian, I don’t think we think it’s necessarily a headwind for ’24, and the reason is we’re placing POs today from a commodity perspective that are below where they were, call it, 90 days ago. And so, if you go back and listen to the remarks, we talked about how that benefit in the P&L will flow through the back half of next year, but we’ll feel that benefit, we believe, next year in a lower price of our inventory. So, the way to think about it is in ’23, we’ve seen some reduction in the value of the inventory, because of containers. We’ve also right-sized our inventory, and there’ll be a minor benefit, as we think, about 2024 from those commodities coming down that we believe offsets any headwind that, we would have from putting you know inventory back in the system for growth. So, you know as we think about next year, we think working capital is probably a neutral type item for us, and we’ll grow our free cash flow with our EBITDA growth.
Brian Butler: Okay, that’s helpful. And then for the margin benefits, for EBITDA, when you think about flat revenues or down revenues in ’24, how much margin benefit do you just get from kind of the lower inventory costs rolling through? Is that 50 basis points, 100 basis points? Can you give some color on that?
Robert Kraft: Yes, we’re not going to quantify that at this point, Brian, because we’re still working on what our plan will be for next year and what we’ll give as guidance. The only thing I would tell you is, as we think about this year’s kind of full year EBITDA rate, we would expect next year to be at or above that number.
Brian Butler: Okay, and then last, just on the 3.5 MinuteKey rollout. So that sounds like it’s a second half of ’24. How many units ultimately do you think goes into that and are those all replacing current units?
Douglas Cahill: So, the great news about that is you think about the retailer. They hate it when all of a sudden you’ve got all this stuff coming in and going out and all these new, you know, I want more floor space. We’re not asking them to do anything. And what we’ll do is, for the most part, is retrofit our existing 3.0 MinuteKey with new brains and a new capability. But it’s not something that the retailer will even feel. So for the most part it’s that. And Jon has a number for next year on machines?
Jon Adinolfi: Yes, we’re going to be north of 500.
Douglas Cahill: Yes, and I think the reason, Brian, I’m saying second half, it’s not that we won’t be doing it in the first half. I just want to be real careful, because when the consumer, you know, gets excited about and decides to spend that kind of money at a kiosk, I think you have to make sure that the backside of that is a really good experience with five stars. That’s why I’m being a little cautious as to when it’ll kick in. But they’ll be machines. They’ll be over 50 by the end of the year or 45. And then they’ll be rolling out starting first quarter. But it’s going to take us time to make sure that experience is great. Now again, it will cut home and office just like it did. And then additionally, you’ll have these other options that will be new.
