Q2 2024 Hamilton Beach Brands Holding Co Earnings Call
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Thank you for standing by I am a boosting that would be a fun French operator today at this time I would like to welcome everyone to the Hamilton Beach brands holding company Q2 earnings conference call and webcast.
Augustine: I am Augustine. I will be your conference operator today.
Operator: At this time, I would like to welcome everyone to the Hamilton Beach brand's housing company Q2 earnings conference call and webcast. All I have been placing you to prevent any background noise.
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Lou Nabhan: I would now like to turn the call over to Lou and Nabhan at the Investor Relations. Please go ahead.
Lou Nabhan: Thank you, Augusta.
Gregory Trepp: Thank you, Augusto. Good morning, everyone, and welcome to the Hamilton Beach Brand second quarter 2024 earnings conference call and webcast. Yesterday, after the stock market closed, we filed with the SEC our Form 10-Q for the quarter ending June 30, 2024, and we issued our second quarter 2024 earnings release. Both documents are available on our corporate website.
Gregory Trepp: Good morning, everyone, and welcome to the Hamilton Beach brand's second quarter 2024 earnings conference call and webcast. Yesterday, after the stock market closed, we filed with the SEC our Form 10-Q for the quarter ending June 30, 2024. And we issued our second quarter 2024 earnings release. Both documents are available on our corporate website.
Gregory Trepp: Our speakers today are Greg Trepp, Chief Executive Officer; Scott Tidy, President; and Sally Cunningham, Senior Vice President, Chief Financial Officer, and Treasurer. Our presentation today includes forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in either our prepared remarks or during the Q&A. Additional information regarding these risks and uncertainties is available in our 10-Q, our earnings release, and our annual report on Form 10-K for the year ended December 31, 2023. The company disclaims any obligation to update these forward-looking statements, which may not be updated until our next quarterly conference call, if at all.
Gregory Trepp: And now I will turn the call over to Greg. Thank you, Lou Ann. Good morning, everyone. Thank you for joining us. Our agenda today is that I will make some brief opening comments. Scott will discuss our performance in more detail. Sally will review our financial results.
Scott: Our agenda today is that I will make some brief opening comments, Scott will discuss our performance in more detail, Sally will review our financial results, and after that, we will take your questions. We are pleased to deliver a very strong second quarter. Our revenue of $156.2 million was a second quarter record and increased 14% from a year ago, and every quarter since that time, we have delivered above our historical range, as our team has done an effective job keeping our gross profit margin strong while remaining competitive in the marketplace.
It's.
Speaker Change: Scott will discuss our performance in more detail.
Speaker Change: Ali will review our financial results after that we will take your questions.
Gregory Trepp: After that, we will take your questions. In every quarter since that time, we have delivered above our historical range as our team has done an effective job keeping our gross profit margin strong while remaining competitive in the marketplace. The second quarter of this year, gross profit margin was 25.9% compared to 20% a year ago. Our operating profit in the second quarter of $10 million increased significantly from last year and was driven primarily by our revenue growth and gross profit margin expansion. Another achievement that began in 2023 was significant progress in reducing pandemic-related excess inventory and the corresponding debt to more normalized levels.
Scott: We were pleased to deliver a very strong second quarter.
Ali: Our revenue of $156 $2 million was a second quarter record and increased 14% from a year ago.
Speaker Change: Starting with the third quarter of last year, we began to show significant year over year improvement in our gross profit margin and.
Ali: In every quarter since that time, we have delivered above our historical range as our team has done an effective job keeping our gross profit margin strong while remaining competitive in the marketplace.
Scott: In the second quarter of this year, the gross profit margin was 25.9%, compared to 20% a year ago. As a result of our disciplined focus on all elements of networking capital, we have made further progress this year, and now I will turn it over to Scott. Thank you, Greg.
Speaker Change: The second quarter of this year gross profit margin was 24, 25, 9% compared to 20% a year ago.
Speaker Change: Our operating profit in the second quarter of $10 million increased significantly from last year and was driven primarily by our revenue growth and gross profit margin expansion.
Speaker Change: Another achievement that began in 2023 was significant progress in reducing pandemic related excess inventory and a corresponding debt to more normalized levels.
Gregory Trepp: As a result of our disciplined focus on all elements of networking capital, we have made further progress this year.
Speaker Change: As a result of our disciplined focus on all elements of networking capital. We have made further progress this year.
Gregory Trepp: as of June 30th of this year. We generated $37 million of cash from operating activities and used it to reinvest in our business and return value to shareholders. We feel very good about the strength of our financial position as we enter the second half of this year and believe we are well positioned to deliver excellent results for the full year 2024.
Speaker Change: As of June 30 of this year, we generated $37 million of cash from operating activities and used it to reinvest in our business and return value to shareholders.
Speaker Change: We feel very good about the strength of our financial position as we enter the second half of this year and believe we are well positioned to deliver excellent results for the full year 2024.
Gregory Trepp: Finally, I am pleased with the progress and seamless transition as Scott has assumed the role of President since the board elected him to that position in February of the year.
Scott: Finally, I am pleased with the progress and seamless transition as Scott has assumed the role of president since the board elected him to that position in February of this year.
Scott Tidy: Our long planned succession process is proceeding very well, and now I will turn it over to Scott. Thank you, Greg. I'm happy to reiterate Greg's comments that we were pleased with the excellent financial results we have achieved and that the moment we carried into this year has continued. Our financial success has been driven by continued progress with our strategic initiatives. The initiatives have enabled us to continue to deliver revenue growth that has outperformed the small kitchen appliance industry, which has been modestly down this year. As you've heard, our revenue increased by 14% in the second quarter.
Speaker Change: A long planned succession process is proceeding very well and now I will turn it over to Scott.
Scott: Thank you Greg.
Scott: I'm happy to reiterate Greg's comments that we are pleased with the excellent financial results we have achieved and that the momentum we carried into this year has continued. First, our focus is on driving the growth of our flagship brands, Hamilton Beach and Procter Sollux, in our core North American market. In the second quarter, revenue for core consumer products increased 13 percent.
Speaker Change: Happy to reiterate Craigs comments that were pleased with the excellent financial results, we have achieved and the momentum we carried into this year has continued our financial success has been driven by continued progress with our strategic initiatives.
Scott: Initiatives have enabled us.
Speaker Change: To continue to deliver revenue growth that has outperformed the small kitchen appliance industry, which has been modestly down this year.
Speaker Change: As you've heard our revenue increased by 14% in the second quarter, Let me discuss the initiatives that have had particularly strong impact on our revenue growth.
Scott Tidy: Let me discuss the initiatives that have had particularly strong impact on our revenue growth. First, our focus is on driving the growth of our flagship brands and with the beach and Proctor solids in our core North America market. In a second quarter, revenue for the core consumer products increased 13%. We have gained market share across North America overall and in several individual categories. These are outstanding achievements that are directly attributed to our exceptional strong culture of innovation and deep capabilities for new product development. Our company has a long history of developing innovative solutions that improve everyday living in the small appliance category.
Speaker Change: First our focus on driving the growth of our flagship brands Hamilton Beach, and Proctor Silex and our core North American market.
Speaker Change: And our second quarter revenue for the core consumer products increased 13%.
Scott: We have gained market share across North America overall and in several individual categories. These are outstanding achievements that are directly rooted in our exceptional strong culture of innovation. We continuously hone our innovation skill set so that we can generate even richer consumer insight. Our new product offerings in the coffee category include our Flex Brew Advanced 5-in-1 Coffee Maker, other new coffee makers, espresso machines, and kettles. New motorized appliances include regular and personal blenders, hand and stand mixers, and juicers.
Speaker Change: Gained market share across North America overall and in several individual categories.
Scott: These are outstanding achievements that are directly attributed to our exceptional strong culture of innovation.
Scott: And deep capabilities for new product development.
Speaker Change: Our company has a long history of developing innovative solutions that improve everyday living in the small appliance category our team studying consumer needs and pain points, and then we refresh existing products or develop entirely new products as we work to delight consumers.
Scott Tidy: Our team studies consumer needs and pain points, and then we refresh existing products or develop entirely new products as we work to delight consumers. We continuously hone our innovation skill set that we can generate even richer consumer insights. Products with unique and proprietary consumer benefits, of course, yield more revenue and profit. Such projects of products are easier to place a retail and tend to keep placements longer. Our goal, therefore, is to maximize innovation within the consumer benefits. Our new product offerings in the coffee category include our Flexbrue advanced five and one coffee maker, other new coffee makers, espresso machines, and kettles.
Speaker Change: We continuously Cohen, our innovation skill set that we can generate even richer consumer insights products with unique and proprietary consumer benefits of course yield more revenue and profit.
Speaker Change: Such projects or products are easier to place at retail.
Speaker Change: Tend to keep placements longer.
Scott: Our goal therefore is to maximize innovation with unique consumer benefits.
Scott: Our new product offerings in the coffee category include our flex brew advanced five in one coffeemaker.
Scott: Other new Coffeemakers espresso machines and kettles.
Scott Tidy: New motorized appliances include regular and personal blenders, hand and stand mixers, and juicers. In our heat group we have new slow cookers, including models that defrost, a number of air fryer toaster ovens, an indoor searing grill with an infusure, toasters, roasters, and griddles, and especially items like our Cassia quesadilla maker. We couldn't be more excited about our lineup of new products and how well retailers and consumers have received them. Our goal is to further increase our growing share for our core brands.
Scott: New motorized appliances include regular and personal blenders hand, and stand mixers and Juicers in.
Scott: And our heat group, we have new slow cookers, including models to defrost, a number of air Fryer, Toaster ovens and endorsed serine grill with an infusion toasters roasters and grills and a specialty item like occupancy a case a dealmaker.
Scott: We couldnt be more excited about our lineup of new products, and how well retailers and consumers have received them.
Scott: Our goal is to further increase our growing share of our core brands. We will continue to devote significant resources to investing in our core competencies that are critical to creating a competitive advantage, including innovation, new product development, and robust digital markets. Next, I will discuss our progress to gain share in the premium market. In the second quarter, sales of premium products increased 20 percent, another outstanding achievement. This year, we have introduced three new irons and a garment steamer featuring CHI's LAVA technology. LAVA is a great heat conductor, and we decided to deploy this innovative technology in our product.
Speaker Change: Our goal is to further increase our growing share for our core brands. We will continue to devote significant resources to investing in our core competencies that are critical to creating a competitive advantage, including innovation, new product development and robust digital marketing.
Scott Tidy: We will continue to both significant resources to investing in our core competencies that are critical to creating a competitive advantage, including innovation, new product development, and robust digital marketing.
Scott Tidy: Next I will discuss our progress to gain share in the premium market. In the second quarter, sales of premium products increased 20 percent. Another outstanding achievement. Department. Our chief brand premium garment care products continue to make a significant contribution to our sales growth in this market. She is one of the premium brands that we license. The brand is incredibly strong in the high-end beauty and personal care market. We have leveraged this outstanding reputation for the benefit of our chief brand irons and garment steamers. We place significant emphasis on innovation and new product development for our chief products.
Scott: Next I will discuss our progress gained share in the premium market in the second quarter sales of premium products increased 20% another outstanding achievement.
Scott: Our chief brand premium garment care products continue to make a significant contribution to our sales growth in this market.
Speaker Change: She is one of the premium brands that we license the brand is incredibly strong and the high end beauty and personal care market. We have leverages outstanding reputation for the benefit of our Chi brand Irons and Garmin steamers, we place significant emphasis on innovation and new product development for our <unk> products. This year, we have introduced three.
Scott Tidy: This year we have introduced three new irons and a garment steamer. Featuring cheese lava technology. Lava is a great key conductor, and we excited to employ this innovative technology in our products. We have generated significant incremental and new placements of our chief line and expect this brand to be a meaningful contributor to our sales and premium products this year.
Scott: New irons in a garment steamer featuring cheese LABA technology lob as a great key conductor and we are excited to deploy this innovative technology in our products, we are generating significant incremental and new placements of our <unk> mine and expect this brand to being a meaningful contributor to our sales in premium products. This year.
Scott Tidy: Under an exclusive multi-year agreement, the Partition premium cocktail maker has also been a performer in our premium market lineup. This year we are extending the line to include a duet model that features two spirit models that is compared to the four models that come with the original model and is available at a lower price. We will also introduce a premier model and a cordless model.
Speaker Change: Under an exclusive multiyear agreement to partition premium cocktail maker has also been a performer in our print and our premium market lineup. This year. We are extending the line to include a duet model that features two spirit bottles as compared to the four models that come with the original model and is available at a lower price. We will also enter.
Speaker Change: <unk>, a premier model and our cordless model.
Scott Tidy: We have been pleased with our trademark license agreements for our lines of Clorox air purifiers and Britahub countertop electric water filtration systems. This year we are extending our Clorox line with our largest yet room air purifier, as well as countertop steam sanitizer and a Clorox humidifier. We are also adding a compact model to our Britahub product. Under that, our Clorox and Brita products also provide a revenue stream from consumable filters.
Scott: We've been pleased with our trademark license agreements for our lines of Clorox air purifiers and Brita Hub countertop electric water filtration. This year, we are extending our Clorox line with our largest yet room air purifier, as well as a countertop steam sanitizer and a Clorox humidifier. We are also adding a compact model to our Brita Hub product.
Speaker Change: We've been pleased with our trademark license agreements for our lines of Clorox Air Purifiers, and Britta hub Countertop electric water filtration systems. This.
Speaker Change: This year, we are extending our clorox line with our largest yet room air purifier as well as our countertop steam sanitizer and Clorox Humidifier, We're also adding a compact model to our brita hub product.
Speaker Change: I'll note that our Clorox and freedom products also provide a revenue stream from consumable filters.
Scott Tidy: This year we introduced our newest premium brand new milk as part of an exclusive multi-year agreement. We are providing the next generation of specialty appliances to create a variety of fresh plant-based milk products. The new milk home machine has just become available on certain e-commerce sites, and our sales teams are soon additional opportunities and retail stores. Our own premium brands handle to be professional Western also benefit from our innovation in new product development and continue to perform well in the market.
Speaker Change: This year, we introduced our newest premium brand new milk as part of an exclusive multiyear agreement. We are providing the next generation of specialty appliances to create a variety of fresh plant based milk products. The new milk home machine has just become available on certain ecommerce sites and our sales team is pursuing additional opportunities.
Scott: The New Milk Home Machine has just become available on certain e-commerce sites, and our sales team is pursuing additional opportunities in retail stores. Our own premium brands, Hamilton Beach Professional, and Westin, also benefit from our innovation and new product development and continue to perform well in the market. We plan to continue to support the growth of all premium brands with new product development, digital marketing, as well as adding new brands through additional partnerships or acquisitions. In the second quarter, revenue from our global commercial market increased 5.5 percent.
Speaker Change: In retail stores.
Speaker Change: Our own premium brands Hamilton Beach professional Weston.
Speaker Change: <unk> benefit from our innovation and new product development and continue to perform well in the market.
Scott Tidy: We plan to continue to support the growth of all premium brands with new product development, digital marketing, as well as adding new brands through additional partnerships or acquisitions.
Speaker Change: We plan to continue to support the growth of all premium brands with new product development digital marketing as well as adding new brands through additional partnerships or acquisitions.
Scott Tidy: Next, our strategic initiative to lead in the global commercial market. In a second quarter, revenue from our global commercial market increased 5.5%. We are a leading provider of commercial small appliances into the food service and hospitality industries worldwide. We focus on developing products that create a competitive advantage in our heritage, clothing, and mixing categories, as well as products that provide for expansion in new categories, including the food service operations that typically exist in the back of the house. Our commercial products are sold in more than 100 countries, and more than 50% of the revenue is from outside of the US.
Speaker Change: Next our strategic initiative to lead in the global commercial market and our second quarter revenue from our global commercial market increased five 5%.
Scott: We are a leading provider of commercial small appliances to the food service and hospitality industries worldwide. We focus on developing products that create a competitive advantage in our heritage blending and mixing categories, as well as products that provide for expansion to new categories, including food service operations that typically exist in the back of the house. Our commercial products are sold in more than 100 countries, and more than 50% of the revenue is from outside the U.S. Building the strength in e-commerce, which is becoming more important in the commercial market, is also a focus, successfully launching our new Powerful Summit Edge Blender, leveraging our partnerships with Bartesian and Numilk. Bartesian sales are focused on restaurants, bars, and hotels.
Speaker Change: We are a leading provider of commercial small appliances into the foodservice and hospitality industries worldwide, we focus on developing products that create a competitive advantage in our heritage blending and mixing categories as well as products that provide for expansion and new categories, including the foodservice operations that typically exist in the back of the.
Speaker Change: Our house, our commercial products are sold in more than 100 countries and more than 50% of the revenues from outside the U S.
Scott Tidy: Building the strength in e-commerce, which is becoming more important in the commercial market, is also a focus.
Speaker Change: Building the strength in E Commerce, which is becoming more important in the commercial market is also a focus.
Scott Tidy: The strategies that we were implementing this year to drive continued growth of this business include. Signet successfully launching our new powerful Summit Edge blender. Increasing our focus on food processing products such as our Big Rig immersion. Landers. Leveraging new business, we have obtained with large hotel chains in the hospitality industry. Continuing increased sales with cruise ships, leveraging our partnerships with Bartesian and Newmilk. Bartesian sales are focused on restaurants, bars, and hotels, and Newmilk sales have particularly strong potential with coffee shops. And finally, we continue to build strength in digital marketing.
Speaker Change: The strategies that we're implementing this year to drive continued growth of this business include <unk>.
Speaker Change: <unk> successfully launching our new powerful summit edge blender, increasing our focus on food processing products, such as our big rig immersion blenders leveraging new business, we have obtained with large hotel chains in the hospitality industry.
Speaker Change: Continued to increase sales with cruise ships.
Speaker Change: Leveraging our partnerships with Cartesian a new milk Cartesian sales are focused on restaurants bars, and hotels and numerous sales have particularly strong potential with coffee shops, and finally, we continue to build strength in digital marketing we.
Scott: And Numilk sales have particularly strong potential in coffee shops. And finally, we continue to build strength in the digital market. Next is our initiative to accelerate the growth of Hamilton Beach Health. While this business is not yet having a material impact on our financial results, we are excited about the growth opportunities we believe it provides, and there have been several accomplishments this year that I'd like to highlight. Since this market is still new to us, let me recap some of the key points we'd like investors to understand. New solutions such as a remote therapeutic monitor are improving accessibility to health care services for many people. They enable providers to identify changes in a patient's status and facilitate faster intervention.
Scott Tidy: We are very optimistic about the potential for the global commercial market to provide significant opportunities in terms of revenue growth and margin expansion in future years.
Speaker Change: We are very optimistic about the potential for the global commercial market to provide significant opportunities in terms of revenue growth and margin expansion in future years.
Scott Tidy: Next is our initiative to accelerate the growth of Hamilton Beach Health. While this business is not yet having a material impact on our financial results, we are excited about the growth opportunities we believe it provides, and there have been several accomplishments this year that I would like to highlight. Since this market is still new to us, let me recap some of the key points we would like for investors to understand. In 2021, we began pursuing opportunities to increase our participation in the large and fast growing home health and wellness market. Rapid growth is being driven by technology, innovation, and a growing shortage of medical staff that formerly treated certain conditions in office settings.
Speaker Change: Next is our initiative to accelerate the growth of Hamilton Beach health, while this business is not yet having a material impact on our financial results. We are excited about the growth opportunities. We believe it provides and there have been several accomplishments this year that I'd like to highlight.
Speaker Change: Since this market is still new to US let me recap some of the key points, we would like for investors to understand.
Speaker Change: And 2021, we began pursuing opportunities to increase our participation in the large and fast growing home health and wellness market rapid growth is being driven by technology innovation and a growing sort of shortage of medical staff that formerly treated certain conditions and office settings.
Scott Tidy: New solutions such as remote therapeutic monitoring are improving accessibility to healthcare services for many people. They enable providers to identify changes in patient status and facilitate faster interventions. Most importantly, they enable patients to participate more actively in their healthcare management, leading to more favorable outcomes. We created a Hamilton Beach Health brand, growing on decades of experience as a trusted resource in the home.
Speaker Change: New solutions, such as a remote therapeutic monitoring are improving accessibility to health care services for many people.
Speaker Change: They enable providers to identify changes in a patient's status and facilitate faster interventions, but most importantly to enable patients to participate more actively in their health care management, leading to more favorable outcomes.
Scott: We created a Hamilton Beach Health brand, drawing on decades of experience as a trusted resource in the home. In February 2024, Hamilton Beach Health acquired HealthBeacon, PLC, a medical technology firm and strategic partner of ours. The acquisition combines the trusted brand name of Hamilton Beach and our leadership in innovation, engineering, product development, and distribution capabilities with HealthBeacon's digital expertise, patented technologies, and customer relationships. HealthBeacon got its start as a developer of digitally connected devices that enable patients to manage at-home chronic conditions that require the use of injectable medications, and it provides other health services. This system is sold primarily through specialty pharmaceutical companies.
Speaker Change: We created the Hamilton Beach Health brand drawing on decades of experience as a trusted resource in the home in February 2020 for Hamilton Beach Health acquired help Beacon plc, a medical technology firm and strategic strategic partner of ours. The acquisition combines the trusted brand name of Hamilton Beach.
Scott Tidy: In February 2024, Hamilton Beach Health acquired Health Beacon, PLC, a medical technology firm and strategic partner of ours. The acquisition combines the trusted brand name of Hamilton Beach and our leadership and innovation, engineering, product development, and distribution capabilities with Health Beacon's digital expertise, patented technologies, and customer relationships. Health Beacon got its start as a developer of digitally connected devices that enable patients to manage at home chronic conditions that require the use of injectable medications, and it provides other health services. The primary system we provide is called the Smart Sharps then from Hamilton Beach Health. Patients receive a counter-top device that is connected to an app that uses patented technology to provide medication reminders, tracking, and 24-7 patient support.
Speaker Change: And our leadership in innovation engineering product development and distribution capabilities with help beacons digital expertise patented technologies and customer relationships.
Speaker Change: <unk> got its start as a developer of digitally connected devices that enable patients to manage at home chronic conditions that require the use of injectable medications and it provides other health services.
Speaker Change: The primary system, we provide is called the smart sharp spin from Hamilton Beach health patients receive a countertop device that is connected to an app that uses patented technology to provide medication reminders tracking and $24 seven patient support the counter top device has a protected container.
Scott Tidy: The counter-top device has a protected container inside it serves as a receptacle used sharps. Once the bin begins to fill out, technology provides an alert for a new one to be sent automatically, and the patient returns the container with used sharps in a prepaid package for safe disposal. This system is sold primarily through especially pharmacies. These healthcare providers appreciate that our system supports patient adherence to the prescribed treatments, which in turn improves health outcomes. The revenue models subscription-based and has a significant higher margin than other products in our portfolio.
Speaker Change: Inside of serves as a receptacle.
Speaker Change: Sharps once the bin begins to fill up technology provides an alert for a new one to be sent automatically in a patient returns the container with use sharps and a prepaid package for safe disposals.
Speaker Change: This system is sold primarily through specialty pharmacies.
Scott: These healthcare providers appreciate that our system supports patient adherence to prescribed treatments, which in turn improves health outcomes. Hamilton Beach Health is expected to contribute to operating profit in 2025 and beyond. Hamilton Beach Health is also exploring additional collaborations to further expand our focus on providing home health care management solutions. In closing, it has been rewarding to see our team accomplish so much during the first half of this year. We're excited to soon enter the holiday season.
Speaker Change: These health care providers and appreciate that our system supports patient adherence to the prescribed treatments, which in turn improves health outcomes. The revenue model subscription based and has a significant higher margin than other products in our portfolio.
Scott Tidy: We believe Health Beacon is an interactive investment with a potential to increase shareholder value over time as the business has scaled and has expanded. Growth plans, including adding new patients with existing specialty pharmacy customers, attracting new specialty pharmacies, and increasing the number of conditions treated, and increasing the number of conditions that are treated using the system.
Speaker Change: We believe help beacon is an attractive investment with a potential to increase shareholder value overtime as the business has scaled and expanded.
Speaker Change: The growth plans, including adding new patients with existing specialty pharmacy customers.
Speaker Change: Attracting new specialty pharmacies and increasing the number of conditions are treated.
Speaker Change: And increasing the number of conditions that are treated using the system.
Scott Tidy: As previously discussed, our Hamilton Beach Health business is expected to have a modest office in 2024, due to planned investments in the business as health-making continues its start-up phase. Hamilton Beach Health is expected to contribute to operating profit in 2025 and beyond.
Speaker Change: As previously discussed our Hamilton Beach Health business is expected to have a modest.
Speaker Change: In 2024 due to planned investments in the business as healthy can continues its startup phase.
Speaker Change: Hamilton Beach Health is expected to contribute to operating profit in 2025 and beyond.
Scott Tidy: Hamilton Beach Health is also exploring additional collaborations to further expand our focus on providing home health care management solutions.
Speaker Change: Hamilton Beach Health is also exploring additional collaborations to further expand our focus on providing home health care management solutions.
Scott Tidy: In closing, it has been rewarding to see our team accomplish so much during the first half of this year. We're excited to soon enter the holiday season. We believe we are well positioned to continue to build upon the momentum we carried into 2024 and which we have advanced as the years unfolded.
Speaker Change: In closing it has been rewarding to see our team accomplished so much during the first half of this year. We're excited to soon enter the holiday season. We believe we are well positioned to continue to build upon the momentum we carried into 2024 and which we have advanced as the year's unfolded I reiterate greg's comments that we expect to deliver a very good performance for the year 2000.
Scott: We believe we are well positioned to continue to build upon the momentum we carried into 2024 and which we have advanced as the years unfolded. I reiterate Greg's comments that we expect to deliver a very good performance in the year 2024. And now I will turn over our discussion to Sally.
Sally Cunningham: I reiterate great comments that we expect to deliver a very good performance for the year 2024, and now I will turn over our discussion to Sally.
Greg: <unk> 24 and.
Greg: And now I will turn over our discussion to Sally.
Sally Cunningham: Thank you, Scott.
Sally: Thank you Scott Good morning, everyone I'll start with our second quarter 2024 results compared to the second quarter of 2023.
Sally Cunningham: Good morning, everyone. I will start with our second quarter 2024 results compared to the second quarter of 2023. As you've heard this morning, we are pleased with our performance. Total revenue in the second quarter was a record $156.2 million. Quarter over quarter revenue increased 14%, based on higher volume and a favorable mix, partially offset by expected average price decreases. More than half of the growth is attributable to the US consumer market, which reflected the incremental and new placements that Scott discussed. Revenue increased in our Mexican and Latin American markets, where our teams have also added incremental placements and new business.
Sally Cunningham: As you have heard this morning, we are pleased with our performance. Total revenue in the second quarter was a record $156.2 million. Quarter over quarter, revenue increased 14% based on higher volume and a favorable mix, partially offset by an expected average price decrease, which reflected the incremental and new placements that Scott discussed. Also included in the second quarter was new revenue from our health beacon acquisition, which was immaterial. The 590 basis point expansion in the gross profit margin was attributable to lower product costs and a favorable product mix.
Sally: <unk> heard this morning, we are pleased with our performance.
Sally Cunningham: Selling, general, and administrative expenses increased to $30.4 million compared to $26.6 million in the second quarter of 2023. About 60% of the increase is related to the addition of Health Beacon's SG&A expenses. The remainder is attributable to non-cash incentive compensation related to stock price appreciation, as well as increased advertising. Net interest expense was $115,000 compared to $773,000 a year ago.
Sally: Total revenue in the second quarter was a record $156 $2 million.
Sally: Quarter over quarter revenue increased 14% based on higher volume and a favorable mix, partially offset by expected average price decreases.
Sally: And then half of the grass is attributable to the U S consumer market.
Scott: Which reflected the incremental and new placement that Scott Scott.
Scott: Revenue increased in our Mexican and Latin American markets, where our teams have also added incremental placements and new business.
Sally Cunningham: Revenue decreased in our Canadian markets, which continues to experience an overall weakness. In our global commercial market, revenue increased 5.5%.
Scott: Revenue decreased in our Canadian market, which continues to experience an overall weakness.
Scott: And our global commercial market revenue increased five 5%.
Sally Cunningham: Also included in the second quarter was new revenue from our health beacon acquisition, which was immaterial. Gross profit totaled $40.5 million, or 25.9% of total revenue, compared to $27.4 million, or 20% of total revenue, last year second quarter. The 590 basis point expansion in the gross profit margin was attributable to lower product costs and a favorable product mix. Selling, general, and administrative expenses increased to $30.4 million compared to $26.6 million in the second quarter of 2023. About 60% of the increase is related to the addition of health beacons SGNA expenses. The remainder is attributable to non-cash incentive compensation related to stock price appreciation, as well as increased advertising expenses.
Scott: Also included in the second quarter with new revenue from our health Beacon acquisition, which was immaterial.
Scott: Sure.
Scott: Gross profit totaled $45 million or 25, 9% of total revenue compared to $27 $4 million or 20% of total revenue in last year's second quarter.
Scott: The 590 basis point expansion in the gross profit margin was attributable to.
Scott: To lower product costs, and a favorable product mix.
Scott: Selling general and administrative expenses increased to $34 million compared to $26 $6 million in the second quarter of 2023.
Scott: About 60% of the increase is related to the addition of health beacons SG&A expenses.
Scott: The remainder is attributable to noncash incentive compensation related to stock price appreciation.
Scott: As well as increased advertising expenses.
Sally Cunningham: Operating profit increased significantly to $10 million compared to operating profit of $700,000 a year ago.
Scott: Operating profit increased significantly to $10 million compared to operating profit of $700000 a year ago.
Sally Cunningham: House. Reflecting our strong revenue growth and gross profit margin expansion. Net interest expense was $115,000 compared to $773,000 a year ago. This reduction is on lower debt levels and higher interest income, about a 50-50 split. Income tax expense was $3 million compared to $114,000 a year ago, which is commensurate with our change in operating profit. Net income was $6 million or $0.42 cents per diluted share, a significant improvement compared to net income of $100,000 or $0.01 cents per diluted share a year ago.
Scott: Reflecting our strong revenue growth and gross profit margin expansion.
Scott: Net interest expense was $115000 compared to $773000 a year ago.
Sally Cunningham: This reduction is due to lower debt levels and higher interest income, about a 50-50 split. Income tax expense was $3 million compared to $114,000 a year ago, which is consistent with our change in operating profit, compared to cash provided of $57.3 million a year ago, and to return value to our shareholders through the quarterly dividend and share repurchase. We paid $3.1 million in dividends during the second quarter of 2024. Additionally, our board has approved a stock repurchase program for the purchase of up to $25 million of the company's Class A common stock, uptake, starting January 1st, 2024 and ending December 31st, 2025. During the three months ended June 30, 2024, we repurchased 220,212 shares.
Scott: This reduction is on lower debt levels and higher interest income about a 50 50 split.
Scott: Income tax expense was $3 million compared to $114000 a year ago.
Scott: It is commensurate with our change in operating profit.
Scott: Net income was $6 million or <unk> 42 per diluted share a significant improvement compared to net income of $100000.
Scott: Our <unk> per diluted share a year ago.
Sally Cunningham: Now turning to our balance sheet and cash lift. For the six months ended June 30th, 2024, net cash provided by operating activities was $37.1 million compared to cash provided of $57.3 million a year ago. Networking capital and the current period provided $38.8 million compared to $69 million a year ago. The 23 and 24 periods benefited from the continued focus on collections that led to DSO improvements. The 2023 period benefited from significant excess inventory reduction activities. Capital expenditures were $1.5 million and the current and prior year periods. We allocated our strong cash flow to fund the acquisition of Health Beacon in the first quarter of this year, and to return value to our shareholders through the quarterly dividend and share repurchases.
Scott: Now turning to our balance sheet and cash flow for.
Scott: For the six months ended June 32024.
Scott: Net cash provided by operating activities was $37 1 million compared to cash provided of $57 $3 million a year ago.
Scott: Net working capital in the current period provided $38 8 million compared to $69 million a year ago.
Scott: <unk> three and 'twenty four periods benefited from the continued focus on collections that led to DSO improvement.
Scott: 'twenty three period benefited from significant excess inventory reduction activity.
Scott: Okay.
Scott: Capital expenditures were $1 $5 million in the current and prior year periods.
Scott: We allocated our strong cash flow to fund the acquisition of health begin in the first quarter of this year.
Scott: And to return value to our shareholders through quarterly dividend and share repurchases.
Sally Cunningham: We paid $3.1 million in dividends during the second quarter of 2024. Our board has approved a stock repurchase program for the purchase of up to $25 million of the company's Class A common stock. Starting January 1st, 2024, and ending December 31st, 2025. During the three months ended June 30th, 2024, we repurchased 222,202 shares at prevailing market prices for an aggregate purchase price of $4 million, leaving $21 million authorized for repurchase. We continue to repurchase shares in the third quarter. Net debt or total debt minus cash and cash equivalents was $12.8 million compared to $57.8 million on June 30th, 2023.
Scott: We paid $3 $1 million in dividends during the second quarter of 2024.
Scott: Our board has approved approved a stock repurchase program for the purchase of up to $25 million of the company's class a common stock outstanding.
Scott: Starting January one 2024, and ending December 31 2020.
Scott: During the three months ended June 32024, we repurchased 220200 to 212 shares.
Scott: And at prevailing market prices for.
Scott: For an aggregate purchase price of $4 million, leaving.
Scott: Leaving $21 million authorized for repurchase.
Scott: We continue to repurchase shares in the third quarter.
Sally Cunningham: Net debt, or total debt minus cash and cash equivalents, was $12.8 million compared to $57.8 million on June 30, 2023. Our revolving credit facility expires on June 30, 2025. Since that time, we have engaged in a thoughtful process and converted the funds to conservative investments during the termination process. Benefit obligations under the plan will be settled through a combination of lump-sum payments to eligible plan participants and the purchase of a group annuity contract, under which future benefit obligations will be transferred to a third-party insurance company.
Scott: Net debt, our total debt minus cash and cash equivalents was $12 8 million compared to $57 8 million on June 32023.
Sally Cunningham: Our revolving credit facility expires on June 30th, 2025. Given current market conditions, including unfavorable pricing terms, we have not yet completed our refinancing of the facility. And accordingly, all amount of standing have been classified as current liabilities on the balance sheet. Based on the current status of the refinancing and our history of successfully refinancing our debt, we believe that it is probable that the facility will be refinanced before its maturity. We believe that funds available from cash on hand, the facility, and operating cash flows will provide sufficient liquidity to meet our operating needs and commitments arising during the next 12 months.
Scott: Our revolving credit facility expires on June 32025 gig.
Scott: Given current market conditions, including unfavorable pricing terms, we have not yet completed our refinancing of the facility and accordingly.
Scott: All amounts outstanding had been classified as current liabilities on.
Scott: On the balance sheet.
Scott: Based on the current status of the refinancing and our history of successfully refinancing our debt. We believe that it is probable that the facility will be refinanced before its maturity.
Scott: We believe that funds available from cash on hand, the facility and operating cash flows will provide sufficient liquidity to meet our operating needs and commitments arising during the next 12 months.
Sally Cunningham: In 2022, our board approved the termination of our overfunded U.S. defined benefit pension plan. Since that time, we have engaged in a thoughtful process and converted the funds to conservative investments during the termination process. Benefit obligations under the plan will be settled through a combination of lump sum payments to eligible plan participants and the purchase of a group of nudity contract under which future benefit obligations will be transferred to a third party insurance company. We expect to finalize the termination process in the third quarter of this year. Upon termination, the deferred loss within accumulated other comprehensive income will be recognized as a non-cash charge and reflected in net income.
Scott: In 2022, our board approved the termination of our Overfunded U S defined benefit pension plan.
Scott: Since that time, we had engaged in a thoughtful process and converted the funds to conservative investments during the termination process.
Scott: Benefit obligations under the plan will be settled through a combination of lump sum payments to eligible plan participants.
Scott: And the purchase of a group annuity contract.
Scott: Under with future benefit obligations will be transferred to a third party insurance company.
Sally Cunningham: We expect to finalize the termination process in the third quarter of this year. Upon termination, the deferred loss within accumulated other comprehensive income will be recognized as a non-cash charge and reflected in net income. More importantly, we will benefit from the surplus assets in the plan, which were $12.2 million as of December 31, 2023. Now, let me turn to our outlook. I'd like to add a little more color to our outlook because of the favorable impact of our focus on cost management and continued progress with our strategic initiatives.
Scott: We expect to finalize the termination process in the third quarter of this year.
Scott: Upon termination the deferred loss within accumulated other comprehensive income will be recognized as a noncash charge and reflected in net income.
Sally Cunningham: The deferred loss is $6.5 million as of June 30, 2024. More importantly, we will benefit from the surplus assets in the plan, which were $12.2 million as of December 31, 2023. We plan to use the surplus assets over the next few years to fund our other existing employee retirement benefits, which may include the company match for our 401(k) plan and/or profit sharing awards. Plan to use of the surplus assets will free cash that otherwise would have been used for these purposes, thereby increasing free cash flow in 2025 and 2026.
Scott: The deferred loss is $6 5 million as of June 32024.
Scott: More importantly, we will we will benefit from the surplus assets in the plan, which were $12 2 million as of December 31 2023.
Scott: We plan to use the surplus assets over the next few years to fund our other existing employee retirement benefits, which may include the company match for our 401k plan and our profit sharing awards.
Scott: Planned is of the surplus assets will free cash that otherwise would have been used for these purposes.
Scott: Thereby increasing free cash flow in 2025 and 2026.
Scott: Yeah.
Sally Cunningham: Let me turn to our outlook. In 2024, the retail marketplace for small kitchen appliances is expected to be modestly below 2023. As Scott reported, we expect that future progress with our strategic initiatives will enable us to continue to deliver above-market revenue performance. As we look towards the rest of 2024, we expect full year revenue to increase modestly and operating profit to increase significantly as compared to the full year of 2023. I'd like to add a little more color to our outlook. As Greg mentioned in his opening remarks, starting in the third quarter of '23 and each quarter since, we have reported significantly expanded revenue, gross profit margin, and operating profit, as demand, price, and cost have normalized.
Speaker Change: Let me turn to our outlook in 2020 for the retail marketplace for small kitchen appliances is expected to be modestly below 2023.
Scott: Scott reported we expect that future progress with our strategic initiatives will enable us to continue to deliver above market revenue performance.
Scott: As we look towards the rest of 2024, we expect full year revenue to increase modestly and operating profit to increase significantly as compared to the full year of 2023.
Speaker Change: I'd like to add a little more color to our outlook.
Scott: As Greg mentioned in his opening remarks.
Speaker Change: Starting in the third quarter of 2003 and each quarter. Since we have reported significantly expanded revenue gross profit margin and operating profit as demand price and costs have normalized and because of the favorable impact of our focus on cost management and continued progress with our strategic initiatives.
Sally Cunningham: And because of the favorable impact of our focus on cost management and continued progress with our strategic initiatives. As we move into the back half of 2024, our growth comparisons will begin to cycle the normalized results that begin in the third quarter of 2023. With respect to our revenue outlook, again, we expect full-year revenue to increase modestly. We expect the revenue growth that we achieved in the first half of this year will be stronger than our estimated revenue growth in the second half due to these year-over-year comparisons. And the first half of 2023 revenue decreased by 9.7% as compared to the first half of 2022 due to soft consumer demand and conservative retailer inventory management in response to interest rate uncertainty in early 2023.
Sally Cunningham: As we move into the back half of 2024, our growth comparisons will begin to cycle the normalized results that began in the third quarter of 2024. The momentum created in the back half of 2023 has carried into 2024. Moving to Operating Profit. In the first half of 2023, operating profit margins decreased by 7.8% due to the revenue decline that I just referenced, compressed gross profit margins, and the non-recurrence of a $10 million insurance recovery in the first half of 2022.
Scott: As we move into the back half of 2024, our growth comparisons will begin to cycle. The normalized results that began in the third quarter of 2023.
Scott: With respect to our revenue outlook again, we expect full year revenue to increase modestly.
Scott: We expect the revenue growth that we achieved in the first half of this year will be stronger than our estimated revenue growth in the second half due to these year over year comparison.
Scott: Yes.
Scott: And the first half of 2023 revenue decreased by nine 7% as compared to the first half of 2020 to.
Scott: Due to soft consumer demand and conservative retailer inventory management and response to interest rate uncertainty in early 2023.
Sally Cunningham: Lee. These unfavorable trends significantly rebound to normalize level and the second half of 2023, when our revenue increased by 3.8%. Reflecting the rebound and retailer order patterns as well as our incremental placements of compelling new products. The momentum created in the back half of 2023 has carried into 2024.
Scott: These unfavorable trends significantly rebound to normalized level in the second half of 2023, when our revenue increased by three 8%, reflecting the rebound in retailer order.
Scott: Excuse me retailer order patterns as well as our incremental placements of compelling new products.
Scott: The momentum created in the back half of 2023 has carried into 2024.
Sally Cunningham: Moving to Operating profit. Again, we expect operating profit to increase significantly as compared to full year 2023. Operating profit growth in the first half of the year is expected to be stronger than the growth we have estimated for the second half. Again, as we cycle over the expanded growth that started in the Q3 of 2023. In the first half of 2023, operating profit margin decreased by 7.8% due to the revenue decline that I just referenced from press growth profit margin and the non-recurrents of a $10 million insurance recovery in the first half of 2022. In the second half of 2023, however, operating profit margin increased by 5% as these unfavorable trends significantly rebounded and demand, price, and cost reached normalize levels.
Scott: Moving to operating profit.
Scott: Again, we expect operating profit to increase significantly as compared to full year 2023.
Scott: Operating profit growth in the first half of the year is expected to be stronger than the growth. We have estimated for the second half.
Dan: Dan as we cycle over the expanded growth that started in Q3 of 2023.
Dan: And the first half of 2023 operating profit margin decreased by seven 8% due to the revenue decline that I just referenced compress script gross profit margins and the non recurrence of a $10 million insurance recovery in the first half of 2022.
Sally Cunningham: In the second half of 2023, however, operating profit margin increased by 5% as these unfavorable trends significantly rebounded, and demand, price, and cost reached normalized levels. In addition, our cost management efforts and progress with our strategic initiatives enabled us to expand our gross profit margin well above our historical range, to 26.5%. We expect that the gross profit margin in the second half of 2024 will be comparable to the second half of 2023. That concludes our prepared remarks. We will now turn the line back to the operator for Q&A.
Scott: And the second half of 2023, however, operating profit margin increased by 5% as these unfavorable trends significantly rebounded and demand pricing cost reached normalized levels and.
Sally Cunningham: In addition, our cost management efforts and progress with our strategic initiatives enabled us to expand our gross profit margin well above our historical range to 26.5%. We expect that gross profit margin in the second half of 2024 will be comparable to the second half of 2023.
Scott: In addition, our cost management efforts and progress with our strategic initiatives enabled us to expand our gross profit margin well above our historical range.
Scott: 226, 5%.
Scott: We expect that gross profit margin in the second half of 2024 will be comparable to the second half of 2023.
Sally Cunningham: That concludes our prepared remarks.
Speaker Change: That concludes our prepared remarks, we will now turn the line back to the operator for Q&A.
Operator: We will now turn the line back to the operator for Q&A. At this time, I would like to remind everyone that in order to ask a question, press start and the number one on your telephone keypad. We will pause for just a moment to take a look at the number one on the telephone keypad.
Scott: Okay.
Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Speaker Change: Lastly, just a moment to compile the Q&A roster.
Scott: Okay.
Scott: Okay.
Scott: Okay.
Scott: Okay.
Scott: Okay.
Scott: Okay.
Sally Cunningham: We will now turn the line back to the operator for Q&A, which is number one on the telephone. Thank you. As you heard today, we are pursuing multiple avenues to continue to grow revenue, like span margins and deliver strong cash flow. Our company is committed to increasing shareholder value over the long term.
Scott: Okay.
Scott: I will turn the call back to Mr. Pat.
Mr. Pat: Thank you.
Scott: Yeah.
Speaker Change: Thank you.
Mr. Pat: As you heard today, we are pursuing multiple avenues to continue to grow revenue expand margins and deliver strong cash flow.
Speaker Change: Our company is committed to increasing shareholder value over the long term.
Sally Cunningham: For the year 2024, we expected deliver a significant increase in an operating profit reflecting our revenue growth and growth growth profit margin expansion. We look forward to finishing this year in a very strong position.
Scott: For the year 2024, we expect to deliver a significant increase in operating profit, reflecting our revenue growth and growth gross profit margin expansion.
Speaker Change: Look forward to finishing this year and a very strong position that concludes our report for today. Thank you again for joining our call.
Operator: That concludes our report for today. Thank you again for joining our call.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Scott: Okay.
Scott: Okay.
Scott: [music].