Q2 2024 Lifetime Brands Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to Lifetime Brands' 2nd Quarter 2024 Earnings Conference Call. At this time, I would like to inform all participants that their lines will be in listen-only mode.
Operator: Welcome to the 2nd Quarter 2024 Earnings Conference Call. At this time, I would like to inform all participants that their lines will be in listen-only mode. After the speaker's remarks, there will be a question and answer portion of the call. If you would like to ask a question during this time, please press star 1 on your telephone keypad. I would now like to introduce your host for today's conference, Carly King. Ms. King, you may begin.
After the speaker's remarks, there will be a question and answer portion of the call. If you would like to ask a question during this time, please press star 1 on your telephone keypad. I would now like to introduce your host for today's conference, Carly King. Ms. King, you may begin.
Carly King: Good morning, and thank you for joining Lifetime Brands' second quarter 2024 earnings call. With us today from management are Rob Kay, Chief Executive Officer, and Larry Winoker, Chief Financial Officer.
Carly King: Thank you.
Speaker Change: Good morning and thank you for joining Lifetime Brands second quarter 2024 earnings call. With us today from management are Rob Kay, Chief Executive Officer and Larry Winoker, Chief Financial Officer.
Carly King: Before we begin the call, I'd like to remind you that our remarks this morning may contain forward-looking statements that relate to the future performance of the company, and these statements are intended to qualify for the safe harbor protection from liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance, and factors that could influence our results are highlighted in today's press release, and other factors are contained in our filings with the Securities and Exchange Commission.
Speaker Change: Before we begin the call,
Speaker Change: I'd like to remind you that our remarks this morning may contain forward-looking statements
Speaker Change: that relate to the future performance of the company.
Speaker Change: And these statements are intended to qualify for the safe harbor protection from liability established by the Private Securities Litigation Reform Act.
Any such statements are not guarantees of future performance, and factors that could influence our results are highlighted in today's press release, and other factors are contained in our filings with the Securities and Exchange Commission.
Carly King: Such statements are based upon information available to the company as of the date hereof and are subject to change for future development; except as required by law, the company does not undertake any obligation to update such statements. Our remarks this morning and in today's press release also contain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Included in such release is a reconciliation of these non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP.
Such statements are based upon information available to the company as of the date hereof and are subject to change for future development.
Speaker Change: Accept as required by law, the company does not undertake any obligation to update such statements.
Our remarks this morning and in today's press release also contain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission.
Included in such release is a reconciliation of these non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP.
Carly King: With that introduction, I'd like to turn the call over to Rob Kay. Please go ahead, Rob.
Speaker Change: With that introduction, I'd like to turn the call over to Rob Kay. Please go ahead, Rob.
Robert Kay: Thank you. Good morning, everyone, and thank you for joining us. Our second quarter results were in line with our expectations, even though macroeconomic pressures led to weakened demand across end markets. Despite these headwinds, we are pleased to report that we continue to execute on our plan for the full year and are making progress toward completing several strategic initiatives which will bolster our full year performance. This includes increasing market share in a majority of our categories, delivering year-over-year e-commerce growth in our core U.S. market, and expanding Gross Market.
Rob Kay: Thank you. Good morning, everyone, and thank you for joining us today.
Speaker Change: Our second quarter results were in line with our expectations, even though macroeconomic pressures led to weakened demand across end markets.
Speaker Change: Despite these headwinds, we are pleased to report that we continue to execute on our plan for the full year and are making progress toward completing several strategic initiatives which will bolster our full year of performance.
Speaker Change: This includes increasing market share in a majority of our categories.
Speaker Change: Delivering year-over-year e-commerce growth in our core U.S. market.
Robert Kay: Our ability to deliver solid performance despite challenges in our operating environment is a testament to the work we have done to strengthen our business model, and we are pleased to have delivered another quarter of outperformance in comparison to the market and our peers. In the second quarter, we delivered $141.7 million in net sales compared to $146.4 million in the same period last year. Over the last 12 months, we have generated an adjusted EBITDA of $56.6 million.
Speaker Change: and Expanding Gross Margins.
Speaker Change: Our ability to deliver solid performance despite challenges in our operating environment is a testament to the work we have done to strengthen our business model, and we are pleased to have delivered another quarter of outperformance in comparison to the market and our peers.
Speaker Change: In the second quarter, we delivered $141.7 million in net sales compared to $146.4 million.
Speaker Change: in the same period last year
Speaker Change: Over the last 12 months, we have generated adjusted EBITDA of $56.6 million.
Robert Kay: The drag on net sales reflected a sluggish market in combination with overall seasonal timing impact in the second quarter for our core U.S. Despite weak demand, we grew market share across the majority of our categories on a year-over-year basis. This is testament to the fact that our leading portfolio of brands continues to resonate with customers. The level of decline observed this quarter was in line with our expectations, and the macroeconomic headwinds were largely vacant to the guidance we provided last year for the full year.
Speaker Change: The drag on net sales reflected a sluggish market in combination with overall seasonal timing impacts.
Speaker Change: in the second quarter for our core U.S. business.
Speaker Change: Despite weak in demand, we grew market share across the majority of our categories on a year-over-year basis.
Speaker Change: a testament to the fact that our leading portfolio of brands continues to resonate with customers.
Speaker Change: The level of decline observed this quarter was in line with our expectations and the macroeconomic headwinds were largely vacant to the guidance we provided last year for the full year.
Robert Kay: We believe that Lifetime's results will improve in the back half of the year as we execute our operational plan, and we continue to expect it to deliver in line with our expectations for 2024. Turning to our international segment, in Europe, the impact of the UK's economic recession has persisted, which has prevented any meaningful recovery in demand.
Speaker Change: We believe that Lifetime's results will improve the back half of the year as we execute our operational plan and we continue to expect it to deliver in line with our expectations for 2024.
Speaker Change: Turning to our international segment.
Speaker Change: In Europe , the impact of the UK's economic recession has persisted, which has prevented any meaningful recovery in demand.
Robert Kay: We continue to take action to offset the recessionary impacts, including implementing changes to our UK sales strategy to shift our legacy focus away from independent retailers and specialty cookshops and prioritizing larger national accounts. This pivot is already paying dividends as we were able to maintain relatively flat sales for the segment despite turbulent market conditions. We are also seeing the impact of the ongoing conflict in the Red Sea, as rerouted shipments are taking longer to reach Europe.
Speaker Change: We continue to take action to offset the recessionary impacts.
Speaker Change: including implementing changes to our UK sales strategy to shift our legacy focus away from independent retailers and specialty cookshops, and prioritizing larger national accounts.
Speaker Change: This pivot is already paying dividends as we were able to maintain relatively flat sales for the segment despite turbulent market conditions.
Speaker Change: We are also seeing the impact of the ongoing conflict in the Red Sea as rerouted shipments are taking longer to reach Europe .
Robert Kay: This has resulted in a need to increase safety stock and, therefore, an increased investment in additional inventory, which will help mitigate these impacts. In Asia-Pacific, we continue to gain traction in terms of both listings and brands in Australia and New Zealand as a result of our change in go-to-market strategy. We are now in the second phase of this two-step process where we will discontinue our partnership with our distributor in the region and move to building out our own infrastructure.
Speaker Change: This has resulted in a need to increase safety stock and therefore an increased investment in additional inventory which will help mitigate these impacts.
Speaker Change: In Asia-Pacific, we continue to gain traction in terms of both listings and brands in Australia and New Zealand as a result of our change in go-to-market strategy.
Speaker Change: We are now in the second phase of this two-step process where we would discontinue our partnership with our distributor in the region and move to building out our own infrastructure.
Robert Kay: Once complete, this will allow us to implement a fully direct APAC sales strategy. Turning now to some of our growth in... We are pleased with the incredible success of our GALI platform and line of products, which was successfully launched in this second quarter and has performed above our and our customers' expectations. While last quarter we said that we did not expect to be able to begin shipping until the third quarter, we were able to begin shipments in the second quarter, although the majority of shipments have not yet completed.
Speaker Change: Once complete, this will allow us to implement a fully direct APAC sales strategy.
Speaker Change: Turning now to some of our growth initiatives.
Speaker Change: We are pleased with the incredible success of our Dolly Parton line of products, which was successfully launched in this second quarter and has performed above our and our customers' expectations.
Speaker Change: while last quarter we signled that we didnot expect to be able to begin shipping until the third quarter we were able to begin shipments in the second quarter
Robert Kay: Initial sell-through numbers have greatly exceeded expectations. We expect that this outperformance will continue through the rest of the year and translate to revenue impact in the third and fourth quarters. We now believe shipments of DALI to the Dollar Channel will exceed $10 million in 2024.
Speaker Change: While the majority of shipments have not yet completed, initial sell-through numbers have greatly exceeded expectations.
Speaker Change: We expect that this outperformance will continue through the rest of the year and translate to revenue impact in the third and fourth quarters.
Speaker Change: We now believe shipments of DALI to the Dollar Channel will exceed $10 million in 2024.
Robert Kay: Building on this strong initial momentum, we are already in discussions with additional customers for 2025 shipments in our food service business. Though we experienced a slight slowdown in the end markets this quarter, we continue to gain market share and remain optimistic based on the continued new listings that we have won, which will see meaningful growth this year and in 2025. Our e-commerce business continues to be a major growth driver. This quarter, e-commerce sales represented 18.9% of revenues compared to 18.1% in the same period last year. We once again had a very successful Amazon Prime Day with total company sales up 23% over the prior year. This compares favorably with the overall Amazon Prime Day sales growth of 11%.
Speaker Change: Building on this strong initial momentum, we are already in discussions with additional customers for 2025 shipment.
Speaker Change: in our food service business.
Speaker Change: Though we experienced a slight slowdown in these end markets this quarter, we continue to gain market share and remain optimistic based on the continued new listings that we have won that will see meaningful growth this year and in 2025.
Speaker Change: Our e-commerce business continues to be a major growth driver.
Speaker Change: This quarter, e-commerce sales represented 18.9% of revenues compared to 18.1% in the same period last year.
Speaker Change: We once again had a very successful Amazon Prime Day with total company sales up 23% over the prior year.
Speaker Change: This compares favorably with the overall Amazon Prime Day sales growth of 11%.
Robert Kay: Turning now to our supply, while ocean freight costs have been increasing as a result of geopolitical conditions and due to vessel and container availability levels, we believe these levels have now stabilized and will remain fixed at a higher base for the foreseeable future. We are managing all input costs across the business and have been successful in decreasing product costs in many areas. This has translated to margin expansion this quarter despite these ocean freight increases. In Mexico, our plastics manufacturing facility remains on schedule to reach full production capacity this year.
Speaker Change: turning now to our supply chain
Speaker Change: While ocean freight costs have been increasing as a result of geopolitical conditions and due to vessel and container availability levels.
Speaker Change: We believe these levels have now stabilized and will remain fixed at the higher base for the foreseeable future.
Speaker Change: We are managing all input costs across the business and have been successful in decreasing product COGS in many areas.
Speaker Change: This has translated to margin expansion this quarter despite these ocean freight increases.
Speaker Change: In Mexico, our plastics manufacturing facility remains on schedule to reach full production capacity this year.
Robert Kay: We have taken a measured approach to ramping up this facility to ensure we achieve high quality output and build the appropriate product mix being produced in this facility. Additionally, we continue to drive forward on our efforts to have approximately 25% of our spend on goods being sourced outside of China and remain on track to meeting this target. We are focused on expanding our sourcing capability in additional geographies, with a primary focus on Southeast Asia, and expect to begin shipping from new locations in the near term.
Speaker Change: We have taken a measured approach to ramping up this facility to ensure we achieve high quality output and build the appropriate product mix being produced in this facility.
Speaker Change: Additionally, we continue to drive forward on our efforts to have approximately 25% of our spend on goods being sourced outside of China and remain on track to meeting this target.
Speaker Change: We are focused on expanding our sourcing capability in additional geographies with a primary focus on Southeast Asia and expect to begin shipping out of new locations in the near term.
Robert Kay: Our manufacturing partners in the region are working with us to set up new factories outside of China in order to accommodate this expansion, and we are already in the process of transferring production of one of our largest SKUs, which represents nearly 10 million unit sales a year, to one such facility. I'd now like to provide some high-level color on our balance sheet, which Larry will discuss in greater detail shortly. Typically, liquidity is most strained during the second quarter as a result of seasonal business trends.
Speaker Change: Our manufacturing partners in the region are working with us to set up new factories outside of China in order to accommodate this expansion, and we are already in the process of transferring production of one of our largest SKUs.
Speaker Change: which represents nearly 10 million unit sales a year to one such facility.
Speaker Change: I'd now like to provide some high-level color around our balance sheet.
Larry: which Larry will discuss in greater detail shortly.
Larry: Typically, liquidity is most strained during the second quarter as a result of seasonal business trends.
Robert Kay: However, our continued focus on operating the business efficiently and using disciplined cash management has allowed us to maintain strong levels of liquidity. For example, we are paying close attention to challenges facing retailers in this environment and have placed certain customers on credit hold to limit our exposure, while a credit hold has a negative impact on near-term sales. We believe this is operationally prudent. We are comfortable with our leverage ratio and pleased with our cast generation levels despite headwinds in the environment.
Larry: However, our continued focus on operating the business efficiently.
Larry: and using disciplined cash management has allowed us to maintain strong levels of liquidity.
Larry: For example, we are paying close attention to challenges facing retailers in this environment and have placed certain customers on credit hold to limit our exposure.
Larry: While a credit hold has a negative impact on near-term sales, we believe this is operationally prudent.
Larry: We are comfortable with our leverage ratio and pleased with our cast generation levels despite headwinds in the environment.
Robert Kay: We continue to view the market as favorable for acquisitions and have an active slate of M&A opportunities in our pipeline. We expect to continue to progress discussions regarding these potential opportunities in the coming months and will keep the market updated on all strategic initiatives. I'd like to briefly touch on the non-cash loss we recorded in the second quarter related to our equity investment in Grupo Basconia, a housewares company in Mexico. In the second quarter, the company discontinued the equity method of accounting for this investment, which resulted in a non-cash loss of $14.2 million, to record the investment at its fair value.
Larry: We continue to view the market as favorable for acquisitions and have an active slate of M&A opportunities in our pipeline.
Speaker Change: We expect to continue to progress discussions regarding these potential opportunities in the coming months and will keep the market updated of all strategic initiatives.
Larry: I'd like to briefly touch on the non-cash loss we recorded in the second quarter related to our equity investment in Grupo Basconia, a housewares company in Mexico.
Larry: In the second quarter, the company discontinued the equity method of accounting for this investment, which resulted in a non-cash loss of $14.2 million.
Larry: to record the investment at its fair value.
Robert Kay: It is important to note that this does not negatively impact our cash flow and is consistent with our view that this stranded asset from an investment made in 2007 is not strategic to our company. Let me expand further on our financial guidance for the full year 2024. In our press release this morning, we revised our guidance for net loss as a result of the non-cash loss related to the non-cash write-down of $14.2 million on our Grupo Vasconi investment.
Larry: It is important to note that this does not negatively impact our cash flow and is consistent with our view that this stranded asset from an investment made in 2007 is not strategic to our company.
Larry: Let me expand further on our financial guidance for the full year 2024.
Larry: In our press release this morning, we revised our guidance for net loss as a result of the non-cash loss related to the non-cash write-down of $14.2 million on our Grupo Vasconi investment.
Robert Kay: Apart from this adjustment, we continue to expect results for the full year in line with our previously shared expectations for all other metrics. We are carefully monitoring the headwinds we saw over the last few months. And as we head into the next quarter, however, our reiterated outlook reflects our confidence in our ability to continue executing and delivering results driven by the strategic initiatives we have in place. As we look ahead to the remainder of the year.
Larry: Apart from this adjustment, we continue to expect results for the full year in line with our previously shared expectations for all other metrics.
Larry: We are carefully monitoring the headwinds we saw over the last few months.
Larry: And as we head into the next quarter, however, our reiterated outlook reflects our confidence in our ability to continue executing and delivering results driven by the strategic initiatives we have in place.
Robert Kay: We believe we are well positioned to continue to grow market share and create value as demand rebounds. We have a strong foundation in place thanks to the significant work completed over the last several years to increase the resiliency of our business model. We look forward to keeping you updated on our progress as we continue expanding our leading portfolio of brands and Delivering Operational Excellence. With that, I'll now turn the call over to Laurence.
Larry: As we look ahead to the remainder of the year.
Larry: We believe we are well positioned to continue to grow market share and create value as demand rebounds.
Larry: We have a strong foundation in place thanks to the significant work completed over the last several years to increase the resiliency of our business model.
Larry: We look forward to keeping you updated on our progress as we continue expanding our leading portfolio of brands.
Larry: driving innovation and delivering operational excellence.
Larry: With that, I'll now turn the call over to Larry.
Laurence Winoker: As we reported this morning, the net loss for the second quarter of 2024 was $18.2 million or $0.85 per diluted share, as compared to $6.5 million loss or $0.31 per diluted share in the second quarter of 2023. The net loss for the current period included a non-cash loss of $14.2 million related to our investment in Coupa Vasconia. Adjusting that loss was... 0.6 million for the second quarter of 2024, or 3 cents per diluted share, as compared to 0.3 million or 2 cents per diluted share in 2023.
Larry: Thanks, Rob.
Larry: As we reported this morning, the net loss for the second quarter of 2024 was $18.2 million or $0.85 per diluted share, as compared to a $6.5 million loss or $0.31 per diluted share in the second quarter of 2023.
Larry: The net loss of the current period included a non-cash loss of $14.2 million related to our investment in Cupo Vasconia.
Larry: Adjusting that loss was...
Larry: for the second quarter of 2024 or three cents per diluted share as compared to 0.3 million or two cents per diluted share in 2023.
Laurence Winoker: Income from operations was 1.2 million in the second quarter of 2024 as compared to income of 4.4 million in the 2023 period. Adjusted income from operations for the second quarter of 2024 was $5.6 million, compared to $8.4 million in the 2023 period, and adjusted EBITDA for the trailing 12-month period ended June 30, 2024 was $56.6 million. Adjusted Net Loss, Adjusted Income from Operations, and Adjusted EBITDA are non-GAAP financial measures which are reconciled to our GAAP financial measures in the earnings release. Following comments for the second quarter of 2024 and 2023, unless stated otherwise.
Larry: Income from operations was $1.2 million in the second quarter of 2024 as compared to income of $4.4 million in the 2023 period.
Larry: Adjusted income from operations for the second quarter of 2024 was $5.6 million compared to $8.4 million in the 2023 period.
Larry: And adjusted EBITDA for the trailing 12-month period ended June 30, 2024, was $56.6 million.
Larry: Adjusted Net Loss, Adjusted Income from Operations, and Adjusted EBITDA are non-GAAP financial measures which are reconciled to our GAAP financial measures in the earnings release. Following comments are for the second quarter of 2024 and 2023, unless stated otherwise.
Laurence Winoker: Consolidated sales declined by 3.2 percent. U.S. segment sales decreased by 3.3 percent to $130.5 million. As Rob commented, macroeconomic pressures have led to weakened demand across end markets. Within the segment, the decrease occurred in the kitchenware and home solutions categories. The kitchenware decline was from kitchen tools and measurement products.
Larry: Consolidated sales declined by 3.2%.
Larry: U.S. segment sales decreased by 3.3% to $130.5 million.
Larry: As Rob commented, macroeconomic pressures have led to weakened demand across end markets. Within this segment, the decrease occurred in the kitchenware and home solutions categories.
Rob Kay: Kitchenware decline was from kitchen tools and measurement products. Home solutions decline was due to lower hydration products and tailor bath measurement products.
Laurence Winoker: The home solutions decline was due to lower hydration products and tailor bath measurement products. The segment's decrease was partially offset by sales for a new licensed product brand in the kitchenware and home solution categories and an increase in the tableware category from a new Warehouse Club program. International segment sales were down by 2.6%, or 0.2 million, or 0.3 million in constant US dollars to 11.2 million. As Rob commented, the impact of the UK's economic recession has persisted, which has prevented a meaningful recovery in demand.
Rob Kay: The segment's decrease was partially offset by sales for a new licensed product brand in the kitchenware and home solution categories and an increase in the tableware category from a new warehouse club program.
Speaker Change: international segment sales were dam by two point six percent will point two million with four point three million in consin u s dollars to eleven point two million
Rob Kay: as rob commented the impact of the uk's economic recession has persisted which has prevented a meaningful recovering demand
Laurence Winoker: The decrease was due to lower replenishment orders for e-commerce and brick-and-mortar customers partially offset by higher sales in Asia. Consolidated gross margin increased to 38.5% from 38.2%. U.S. segment gross margin increased to 38.7 from 38.3 percent. This improvement was due to a favorable product mix.
Rob Kay: The decrease was due to lower replenishment orders for e-commerce and brick-and-mortar customers, partially offset by higher sales in Asia.
Rob Kay: Consolidated gross margin increased to 38.5% from 38.2%.
Rob Kay: U.S. segment gross margin increased to 38.7 from 38.3 percent. This improvement was due to favorable product mix.
Laurence Winoker: For international gross margin, which decreased to 36.6% from 37.7%, was driven by a higher mix of distributor sales to Australia. U.S. segment distribution expenses as a percentage of goods shipped from its warehouses were 9.5% for 2024 versus 9.7% in 2023. Lower freight out expenses more than offset the impact of lower shipments. Despite inflationary pressures, continuous improvements in labor and other expense management and lower inventory levels mitigated the impact.
Rob Kay: For international gross margin, which decreased to 36.6% from 37.7, was driven by higher mix of distributor sales to Australia.
Rob Kay: U.S. segment distribution expenses as a percentage of goods shipped from its warehouses was 9.5% for 2024 versus 9.7% in 2023. Lower freight out expenses more than offset the impact of lower shipments.
Rob Kay: Despite inflationary pressures, continuous improvements in labor and other expense management and lower inventory levels mitigated the impact.
Speaker Change: international segment distribution expenses as a percentage of good ship from its warehouses with twenty-five point one percent for both twenty- four and twenty-three as higher occupancy costs were offsetpped by favorable freight rates
Laurence Winoker: International segment distribution expenses as a percentage of goods shipped from its warehouses were 25.1% for both 24 and 23, as higher occupancy costs were offset by favorable freight rates. Consolidated selling, general, and administrative expenses increased by 6.7% to $38.3 million. U.S. segment expenses increased by $2 million to $29.4 million. As a percentage of net sales, expenses increased to 22.5% from 20.3%.
Laurence Winoker: Other increases included expenses related to the start-up of manufacturing operations in Mexico. This was partially offset by a decrease in the provision for doubtful accounts. International SG&A expenses decreased $5.2 million to $3.8 million. As a percentage of net sales, it decreased to 33.9% from 35.1%. The decrease was driven by lower advertising and commission expenses, partially offset by higher employee expenses, and Unallocated Corporate Expenses increased by $0.6 million to $5.1 million due to high incentive compensation and professionalism.
Rob Kay: Consolidated selling, general and administrative expenses increased by 6.7% to $38.3 million.
Rob Kay: U.S. segment expenses increased by $2 million to $29.4 million. As a percentage of net sales, expenses increased to 22.5% from 20.3%.
Speaker Change: the increase are driven by by inflationary factors most of which related to employee cost the largest component of sdna
Rob Kay: other increases included expenses related to the start up of manufacturing operations in mexico this was partially offset by a decrease in the provision for doubtful accounts
Rob Kay: International SG&A expenses decreased $5.2 million to $3.8 million. As a percentage of net sales, it decreased to 33.9% from 35.1%.
Rob Kay: The decrease was driven by lower advertising and commission expenses, partially offset by higher employee expenses.
Rob Kay: and onl and unallocated corporate expenses increased by point six million to five point one million due to high incentive compensation and professional fees
Laurence Winoker: Our interest expense, excluding mark-to-market adjustment for swaps, decreased by $0.3 million due to lower average borrowings partially offset by higher interest rates on our variable rate debt. As Rob discussed with respect to Baskonia, due to a reorganization resolution by Baskonia under the Mexico Bankruptcy Law, a company with which we have a 24.7% investment, we determined that we no longer had significant influence over our investors. This resulted in the discontinuance of the use of the equity method of account.
Rob Kay: Our interest expense, excluding mark-to-market adjustment for swaps, decreased by $0.3 million due to lower average borrowings partially offset by higher interest rates on our variable rate debt.
Rob Kay: As Rob discussed with respect to Vasconia, due to a reorganization resolution by Vasconia under Mexico bankruptcy law, a company which we have a 24.7% investment, we determined that we no longer had significant influence over our investment.
Rob Kay: This resulted in the discontinuance of the use of the equity method of accounting.
Laurence Winoker: Upon discontinuation, $14.2 million of related foreign currency translation losses previously reported in the Accumulated Comprehensive Loss Statement were reclassified to the investment balance and then written off. This write-up was non-cash and had no effect on our ongoing operations or business strategy. For income taxes in the current period, the effective income tax rate differs from the federal statutory rate primarily due to equity-based awards where the book expense exceeds the tax deduction and foreign losses for which no benefit was recognized. The effective tax rate for the prior quarter differs from the federal statutory rate, primarily due to state and local tax expense, the impact of non-deductible expenses, and foreign losses for which no tax benefit is recognized.
Rob Kay: Upon discontinuation, $14.2 million of related foreign currency translation losses previously reported in Accumulated Comprehensive Loss Statement were reclassified to the investment balance and then written off.
Rob Kay: This write-up was non-cash and had no effect on our ongoing operations or business strategy.
Rob Kay: For income taxes in the current period, the effective income tax rate differs from the federal statutory rate primarily due to equity-based awards where the book expense exceeds the tax deduction and foreign losses for which no benefit was recognized.
Unknown Executive: 2nd quarter, 2024, Earnings Conference Call. At this time, I would like to inform all participants that their lines will be in listen only mode. After the speaker's remarks, there will be a question and answer portion of the call. If you would like to ask a question during this time, please press star one on your telephone keypad.
Rob Kay: The effective tax rate for the prior quarter differs from the federal statutory rate primarily due to state and local tax expense, the impact of non-deductible expenses, and foreign losses for which no tax benefit is recognized.
Laurence Winoker: Turning to our balance sheet, it continues to be quite strong. As of June 30, 2024, our liquidity was approximately $119 million, which included cash plus availability under our credit facility and receivable purchase agreement. Since year-end 2023, we've further de-levered our balance sheet, reducing our net debt by $70 million. And as of June 30th of this year, our net debt to adjusted EBITDA leverage ratio was 3.3 times. As provided in the release, we are reiterating our financial guidance for the full year 2024 except for the non-cash loss of $14.2 million related to the investment in Baskonia.
Rob Kay: Turning to our balance sheet, it continues to be quite strong. As of June 30, 2024, our liquidity was approximately $119 million, which included cash plus availability under our credit facility and receivable purchase agreement.
Unknown Executive: I would not like to introduce your host for today's conference, Carly King, Ms. King, you may begin. Thank you. Good morning, and thank you for joining Lifetime Brands 2nd quarter, 2024, Earnings Call.
Rob Kay: Since year-end 2023, we've further delevered our balance sheet, reducing our net debt by $70 million. And as of June 30th of this year, our net debt to adjusted EBITDA leverage ratio was 3.3 times.
Unknown Executive: With us today from management, our Rob Kay, Chief Executive Officer, and Larry Winoker's Chief Financial Officer. Before we begin the call, I'd like to remind you that our remarks this morning may contain forward-looking statements that relate to the future performance of the company, and these statements are intended to qualify for the safe harbor protection from liability established by the Private Security's Litigation Reform Act. Any such statements are not guarantees of future performance, and factors that could influence our results are highlighted in today's press release, and other factors are contained in our filings with the Securities and Exchange Commission.
Speaker Change: As provided in the release, we are reiterating our financial guidance for the full year 2024 except for the non-cash loss of $14.2 million related to the investment in Baskonia.
Laurence Winoker: 2024 financial guidance is as follows: net sales of 690 to 730 million, adjusted income from operations of 49 to 54 million, adjusted net income of 15 million to 17 million, and adjusted EBITDA of 57.5 to 62.5 million. This concludes our prepared comments. Operator, please open the line for questions.
Rob Kay: 2024 financial guidance is as follows.
Rob Kay: Net sales of $690 to $730 million. Adjusted income from operations of $49 to $54 million. Adjusted net income of $15 million to $17 million. And adjusted EBITDA of $57.5 to $62.5 million.
Unknown Executive: Such statements are based upon information available to the company as of the date hereof, and are subject to change for future development. Except is required by law, the company does not undertake any obligation to update such statements. Our remarks this morning and in today's press release also contain non-gap financial measures within the meaning of regulation G promulgated by the Securities and Exchange Commission. Included in such release is a reconciliation of these non-gap financial measures with the comparable financial measures calculated in accordance with gaps.
Rob Kay: This concludes our prepared comments. Operator, please open the line for questions.
Operator: Thank you. At this time, I would like to remind everyone, in order to ask a question, press star 1 on your telephone keypad. And your first question comes from the line of Anthony Lebiedzinski with Sidoti. Please go ahead.
Speaker Change: thank you at this time i would like to remind everyone in order to ask a question pressed bar woning your telephone keep ad and your first question comes from the line of anthony liberis zinski with c go please go ahead
Anthony Lebiedzinski: Good morning, gentlemen, and thank you for taking the questions. So, Rob, you talked about the sluggish demand in the second quarter and seasonal timing of shipments. Just wondering if you guys could provide any more details in regards to that. Whether or not you know more of the sales decline was because of just market sluggishness, or you know, just help us out. Maybe just understand as far as how the quarter progressed.
Speaker Change: Good morning, gentlemen, and thank you for taking the questions.
Robert Kay: With that introduction, I'd like to turn the call over to Rob Kay. Please go ahead Rob. Thank you.
Anthony Liberiszinski: So, Rob, you talked about the sluggish demand in the second quarter, also seasonal timing of shipments. Just wondering if you guys could provide any more details in regards to that.
Robert Kay: Good morning everyone, and thank you for joining us today. Our second quarter results were in line with our expectations even though macroeconomic pressures led to weakened demand across end markets. Despite these headwinds, we are pleased to report that we continue to execute on our plan for the full year and are making progress toward completing several strategic initiatives which will bolster our full year performance. This includes increasing market share and a majority of our categories, delivering year over year e-commerce growth in our core U.S, market and expanding gross margins.
Speaker Change: whether or not the more of the sales decline was because of just market sluggishness or you just help us out maybe justmisunderstand as far as how the quarter progressed
Robert Kay: Yeah. Morning, Anthony.
Robert Kay: As we talked about in our remarks, you know, we saw a lot of this coming when we issued the full-year guidance. So, you know, directionally, we were not surprised. The end market demand was a little greater than we thought, offset by some new initiatives, particularly Dolly, and success in growing our e-commerce sales offset that. And our market shares, as we talked about, overall increased, which, again, offset the greater market direction.
Speaker Change: yes as fi i as we talked about in our remarks we had
Speaker Change: saw a lot of this coming when we issued the full year guidance.
Speaker Change: So we, you know, directionally, we were not surprised. The end market...
Robert Kay: Our ability to deliver solid performance despite challenges in our operating environment is a testament to the work we have done to strengthen our business model and we are pleased to have delivered another quarter of outperformance in comparison to the market and our peers. In the second quarter, we delivered $141.7 million in net sales compared to $146.4 million in the same period last year. Over the last 12 months, we have generated the subsidy of $56.6 million.
Speaker Change: Demand was a little greater than we thought offset by some new initiatives particularly Dolly and Success in growing our e-commerce
Speaker Change: sales offset that
Rob Kay: and our market shares as we talked about overall.
Rob Kay: increased
Rob Kay: which again offset the greater market direction. Aside from that, and as we had expected, some timing, which particularly applies to club, which are sizable orders.
Robert Kay: Aside from that, and as we had expected, some timing, which particularly applies to club, which are sizable orders. On a year-over-year basis, we'll be in the second half, whereas we had more in the first half of the year, last year, in that channel. And that accounts for the remainder of the decline in the second quarter. That is our timeline.
Robert Kay: The drag on sales reflected a sluggish market in combination with overall seasonal timing impacts in the second quarter for our core US business. Despite weak and demand, we grew market share across the majority of our categories on a year-over-year basis. A testament to the fact that our leading portfolio of brands continues to resonate with customers. The level of decline observed this quarter was in line with our expectations and the macroeconomic headwinds were largely based into the guidance we provided last year for the full year. We believe that Lifetime's results will improve the back half of the year as we execute our operational plan and we continue to expect to deliver in line with our expectations for 2024.
Rob Kay: On a year-over-year basis, we'll be second half, whereas we had more in the first half of the year last year in that channel, and that accounts for the remainder of the decline in the second quarter. That is our timeline.
Robert Kay: Okay, you got it. Yeah, that's very helpful. And in terms of Dolly Parton products, I mean, did I miss, did you guys say how much of that was in the second quarter, or was there anything material to call out?
Speaker Change: Okay, you got it. Yeah, that's very helpful. And in terms of Dolly Parton products, I mean,
Speaker Change: Did I miss, did you guys say how much of that was in the second quarter or was there anything material to call out?
Robert Kay: We didn't expect it to be that much, but we ended up shipping $4 million in the second shipment.
Speaker Change: We didn't expect it to be that much, but we ended up shipping $4 million in the second quarter.
Robert Kay: Gotcha. Okay. So for the full year, I think you said you expected to exceed $10 million for a Dolly Parton product?
Speaker Change: Gotcha. Okay. So for the full year, I think you said you expect to exceed $10 million for Dolly Parton products?
Robert Kay: Correct into the dollar channel, we may have some sales beyond the dollar channel that will hit 24. Not certain yet whether that will hit 24 and 25 based upon availability since it's exceeded our expectations in terms of getting availability of products.
Speaker Change: Correct into the dollar channel. We may have some sales beyond the dollar channel. That will hit 24.
Robert Kay: Turning to our international segment. In Europe, the impact of the UK's economic recession has persisted, which has prevented any meaningful recovery and demand. We continue to take action to offset the recessionary impacts including implementing changes to our UK sales strategy to shift our legacy focus away from independent retailers and specialty cook shops and prioritizing larger national accounts.
Speaker Change: I'm not certain yet whether that will hit 24 and 25, based upon availability, since it's exceeded our expectations, getting availability of product in time.
Robert Kay: Gotcha. Good.
Robert Kay: And then, you know, how would you characterize your own inventories and inventory at retail? No, you know, one of your competitors last month came out with lower than expected results. And, you know, they had some internal issues, but they have talked about a, you know, just seeing kind of a stretch consumer out there. So, you know, what are your thoughts there as far as, you know, inventory at retailers and retailers' willingness to replenish orders? What are your thoughts?
Speaker Change: How would you characterize your own inventories and inventory at retail? One of your competitors last month came out with lower-than-expected results, and they had some own internal issues, but they had talked about just seeing...
Robert Kay: This pivot is already paying dividends as we were able to maintain relatively flat sales for the segment despite turbulent market conditions. We are also seeing the impact of the ongoing conflict in the Red Sea as re-rooted shipments are taking longer to reach Europe. This has resulted in a need to increase safety stock and therefore an increase investment in additional inventory which will help mitigate these impacts.
Speaker Change: kind of a stretched consumer out there. So, you know, what are your thoughts there as far as, you know, inventory at retailers and retailers willingness to replenish orders? What are your thoughts?
Robert Kay: Sure, well, the first part of your question in terms of our own inventories. We've been very focused on inventories for years now, and our inventory levels are appropriate, and we react very quickly to any changes in volumes as well as on them, whether it's Q level or other basis, such as with the Outperformance of Dolly. We reacted very quickly to get in more.
Speaker Change: Sure, well, the first part of your question in terms of our own inventories.
Speaker Change: We've been very focused on the inventories for years now and our inventory levels...
Robert Kay: In Asia Pacific, we continue to gain traction in terms of both listings and brands in Australia and New Zealand as a result of our change in go-to-market strategy. We are now in the second phase of this two-step process where we would discontinue our partnership with our distributor in the region and move to building out our own infrastructure. Once complete, this will allow us to implement a fully direct APAC sales strategy.
Speaker Change: are appropriate and we react very quickly with any changes in volume as well as on it whether it's Q level or other basis such as with the outperformance of Dolly we reacted very quickly to get in more into it.
Speaker Change: So we think our inventory levels are.
Speaker Change: Appropriate and streamlined in
Robert Kay: In the U.K. we've needed to, and Europe, our hub in the Netherlands, we've needed to increase those levels as a result of the fact that shipments are now coming around the Cape and not through the canal and the Red Sea, and that adds a couple of weeks, so you need to offset that by carrying higher levels of inventory, not significant, but definitely higher levels. So we've increased there. In terms of the bulkier question of at retail, in more challenging economic times, particularly the larger and the more sophisticated retailers lower their investment and want more. So they are leaner on their inventory levels than they have been in better times.
Robert Kay: Turning now to some of our growth initiatives. We are pleased with the incredible success of our Gali Park and Line of Products which was successfully launched in this second quarter and has performed above our and our customers' expectations. While last quarter we say that we did not expect to be able to begin shipping until the third quarter, we were able to begin shipments in the second quarter. While the majority of shipments have not yet completed, initial sell-through numbers have greatly exceeded expectations.
Speaker Change: The UK, we've needed to, and Europe , the Netherlands, we've needed to increase those levels.
Speaker Change: as a result of the fact that shipments are now coming around the Cape and not through the canal.
Speaker Change: and the Red Sea, and that adds a couple of weeks, so you need to offset that by counting higher levels of inventory. Not significant, but definitely higher levels.
Speaker Change: So we've increased there. In terms of the bulkier question of at retail, you know, in more challenging economic times,
Robert Kay: We expect that this outperformance will continue through the rest of the year and translate to revenue impact in the third and fourth quarters. We have now believed shipments of Gali to the Dollar Channel will exceed $10 million in 2024. Building on this strong initial momentum, we are already in discussions with additional customers for 2025 shipment.
Speaker Change: Particularly the larger and the more sophisticated retailers lower their investment and want more.
Speaker Change: Replenishment
Speaker Change: from their customers. A bigger player like us, it actually benefits our market position, but there has been definitely a shift and we've seen that for quite some time. And that always gives a leading indicator of where we see the markets going. So there's definitely some pullback.
Robert Kay: In our food service business, though we experience a slight slowdown in these end markets this quarter, we continue to gain market share and remain optimistic based on the continued due listings that we have won, that we'll see meaningful growth this year and in 2025. Our e-commerce business continues to be a major growth driver. This quarter, e-commerce sales represented 18.9% of revenues compared to 18.1% in the same period last year. We once again had a very successful Amazon Prime Day with total company sales up 23% over the prior year. This compares favorably with the overall Amazon Prime Day sales growth of 11%.
Speaker Change: in levels at most of our customers.
Speaker Change: so they are leaner on door levels than they have been in better times
Robert Kay: Gotcha. Okay. And then last question for me. So, as we look to update our models for Q3 and Q4, is there anything that we should be aware of in terms of just timing of shipments other than what you already talked about? Or is there anything about timing of costs that we should be aware of?
Speaker Change: gotcha okay and then last question for me
Speaker Change: So, as we look to update our models for Q3 and Q4, you know, is there anything that we should be aware of in terms of just timing of shipments other than what you already talked about or is there anything timing of cost that we should be aware of?
Robert Kay: No, I mean, nothing that we haven't stated. You know, the big cost increase besides, you know, overall, you know, inflation, I think the big cost increase has been ocean freight, which we haven't experienced, as we mentioned, it's stabilized. We don't expect it to change from where it is. So on a year over year basis, ocean freight is up, stabilized at a level less than our expectations, which is good. So we factored it all in.
Speaker Change: No, I mean, nothing that we haven't stated, you know, the big cost increase besides, you know, overall, you know.
Robert Kay: Turning now to our supply chain, while ocean-free costs have been increasing as a result of geopolitical conditions and due to vessel and container availability levels, we believe these levels have now stabilized and remain fixed at the higher base for the foreseeable future. We are managing all input costs across the business and have been successful in decreasing product costs in many areas. This has translated to margin expansion this quarter despite these ocean-free increases.
Speaker Change: Inflation, I think the big cost increase has been ocean freight, which we haven't experienced, as we mentioned. It's stabilized. We don't expect it to change from where it is, so on a year-over-year basis, ocean freight is up.
Speaker Change: um
Speaker Change: Stabilized at a level less than our expectations, which is good, so we factored it all in.
Robert Kay: And we don't expect it to change much. And the big driving factor isn't geopolitical conditions. The big driving factor is the ocean carriers and them taking a lot of tonnage offline, and therefore, supply and demand, it created an increase in. We've offset that, particularly on a cost of goods sold basis, by driving down the cost of what we are paying for our goods. There should be no change beyond our expectations and from a timing perspective. There is some upside if we can get more product, you know, for demand on DALI, but, you know, basically...
Speaker Change: and we don't expect it to change much. And the big driving factor isn't geopolitical conditions. The big driving factor are the ocean carriers and them taking a lot of tonnage.
Speaker Change: Offline and therefore supply and demand, it created an increase in
Robert Kay: In Mexico, our plastics manufacturing facility remains on schedule to reach full production capacity this year. We have taken a measured approach to ramping up this facility to ensure we achieve high-quality output and build the appropriate product mix being produced in this facility. Additionally, we continue to drive forward on our efforts to have across me 25% of our spend on goods being sourced outside of China and remain on track to meeting this target.
Speaker Change: We've offset that particularly on a cost of goods sold basis by driving the cost of what we're paying for our goods.
Speaker Change: There is some upside if we can get more product, you know, for demand on DALI, but you know, basically everything.
Anthony Lebiedzinski: Okay. Well, thank you very much and best of luck.
Speaker Change: Okay. Well, thank you very much and best of luck.
Linda Bolton: Your next question comes from the line of Linda Bolton Weiser with D.A. Davidson. Please go ahead.
Speaker Change: Thank you, Anthony.
Speaker Change: Your next question comes from the line of Linda Bolton Weiser, D.A. Davidson. Please go ahead.
Robert Kay: We are focused on expanding our sourcing capability in additional geographies with a primary focus on Southeast Asia and expect to be contributing out of new locations in the near term. Our manufacturing partners in the region are working with us to set up new factories outside of China in order to accommodate this expansion. We are already in the process of transferring production of one of our largest spears which represents nearly 10 million unit sales a year to one such facility.
Linda Bolton: Yes, hello. Hi. Um, so I was Unknown Speaker. I'm curious. I'm curious. If you could give us an update on the Swell acquisition, sort of a state of the union on how that brand is doing since you acquired it.
Linda Bolton: Yes, hello. Hi.
Speaker Change: Yes, hello, hi. So, I was just curious if you could give us an update on the Swell acquisition, sort of a state of the union on how that brand is doing since you acquired it.
Robert Kay: As we talked about at the time of the acquisition, the biggest known challenges centered around And if you go on our website and social media, you'll notice there's been a tremendous amount of new product introduction because we inherited no pipeline, basically. So that's created newness, which is driving new opportunities, particularly in the e-commerce channel, where when you're just selling the same thing, you know, there becomes a decline in your demand. But now that we've replenished the offering, we've seen both in Swell.com, Amazon, and other channels, a nice uptick.
Speaker Change: As we talked about at the time of the acquisition, the biggest known challenges centered around
Robert Kay: I'd now like to provide some high-level color around our balance sheet which Larry will discuss in greater detail shortly. Typically, liquidity is most drained during the second quarter as a result of seasonal business trends. However, our continued focus on operating the business efficiently and using discipline cash management has allowed us to maintain strong levels of liquidity.
Speaker Change: stpped their overseas channels as well as e-commerce and to the amazon so we need e to be a lag that's all run throughue and therefore you know picked up as a result the other thing that has been successful ro
Speaker Change: And if you go on our website and social media, you'll notice there's been a tremendous amount of new project introduction because we inherited no pipeline, basically. So that's created newness, which is driving
Robert Kay: For example, we are paying close attention to challenges facing retailers in this environment and a place certain customers on credit hold to limit our exposure. While a credit hold has a negative impact on near-term sales, we believe this is operationally prudent. We are comfortable with our leverage ratio and pleased with our cash generation levels despite headwinds in the environment.
Speaker Change: opportunities, particularly in the e-commerce channel where when you're just selling the same thing, you know, there becomes a decline in your demand. But now that we've replenished the offering, we've seen both
Speaker Change: and Swell.com, Amazon and other channels, a nice uptick.
Robert Kay: One thing we did not anticipate when we bought the business is that we were very interested in and we find the promotional direct corporate channel that Swell had to be very attractive, and we got a lot of talent with that. The talent has exceeded our expectations, but the relationships that they were selling through needed to be. We're completely redone, that's why we took a charge last year, and this year we're doing much better, and we've seen a tremendous increase, and that helped actually in the second quarter, as we've solved the issues that we faced last year, and did that in a manner that exceeded our expectations.
Robert Kay: We continue to view the market as favorable for acquisitions and have an active slate of M&A opportunities in our pipeline. We expect to continue to progress discussions regarding these potential opportunities in the coming months and will keep the market updated of all strategic initiatives.
Speaker Change: One thing we did not anticipate.
Speaker Change: When we bought the business is that we were very interested and we find the promotional direct corporate channel that Swell had to be very attractive and we got a lot of talent with that. The talent exceeded our expectations.
Robert Kay: I'd like to briefly touch on the non-cash loss we've recorded in the second quarter related to our equity investment in Grupo, Vesconia, a housewares company in Mexico. In the second quarter, the company discontinued the equity method of counting for this investment which resulted in the non-cash loss of $14.2 million to record the investment in that it's better value.
Speaker Change: But the relationships that they were selling through needed to be
Speaker Change: Completely redone. That's why we took a charge last year. And that's this year, we're doing much better. And we've seen a tremendous increase. And that helped actually, in the second quarter, as we've solved the issues that we faced last year.
Speaker Change: did that in a manner that exceeded our expectations. So Swell is doing well. We need to, with that division, the whole build and Swell division is one division.
Robert Kay: So that's doing well; we need to, with that division, the whole built and small division, it's one division. There has been, with the tremendous growth of Stanley, the category has done well, but besides Stanley, most people have not. There's been a decline in shares, so we've been winning back some shares, and that should benefit us on the go-forward.
Robert Kay: It is important to note that this does not negatively impact our cash flow and is consistent with our view that this stranded asset from an investment made in 2007 is not strategic to our company.
Speaker Change: There has been, with the tremendous growth of Stanley, the category has done well, but besides Stanley, most people have not.
Robert Kay: Let me expand further on our financial guidance for the pro-year of 2024. In our press release this morning, we revised our guidance for net loss as a result of the non-cash loss related to the non-cash right down of $14.2 million on our Grupo Vesconia investment. Apart from this adjustment, we continue to expect results for the full year in line with our previously shared expectations for all other metrics. We are carefully monitoring the headwinds we saw over the last few months and as we head into the next quarter, however, our reiterated outlook reflects our confidence in our ability to continue executing and delivering results driven by the strategic initiatives we have in place.
Speaker Change: There's been a decline in shares, so we've been winning back some share. And that should benefit us on a go-forward basis.
Speaker Change: Okay. And then, um,
Linda Bolton: Okay, and then. You know, we get Nielsen data, the POS data, which covers just the US, and it doesn't include e-commerce. So it's only tracking channels, so it only covers some of your sales. But nevertheless, it shows a really bad trend, like really big year-on-year declines. You know, so this would be at Walmart and Target, you know, other channels. Is there any way you can explain to us why the declines in the Nielsen data look so much bigger than the decline in revenue you actually report?
Speaker Change: You know, we get the Nielsen data, the POS data, which covers just the U.S. and it doesn't include e-commerce.
Speaker Change: So it's only track channels, so it only covers some of your sales, but nevertheless, it shows a really bad trend, like really big year-over-year declines. You know, so this would be at Walmart and Target.
Speaker Change: Other Channels. Is there any way you can explain to us why the declines in the Nielsen data look so much bigger than the decline in revenue you actually report?
Robert Kay: As we look ahead to the remainder of the year, we believe we are well positioned to continue to grow market share and create value as demand rebounds. We have a strong foundation in place thanks to the significant work completed over the last several years to increase the resiliency of our business model.
Robert Kay: Um... So again, it's well covered. We purchase a lot of data, and it's all Circona data, right? So NPD-IRI, and that's it.
Speaker Change: So, again, it's well-covered. We purchase a lot of data, and it's all Circona data, right, so NPD-IRI, and that's...
Robert Kay: It covers a lot of the universe. There is, to your point, less data overseas. We do have some, but not as much. So part of it is what's channeled, so we had growth in the dollar channel. I'm not sure if that's captured in Nielsen, right?
Robert Kay: We look forward to keeping you updated on our progress as we continue expanding our leading portfolio of brands, driving innovation and delivering operational excellence.
Speaker Change: Covers a lot of the universe. There is, to your point, less data overseas.
Speaker Change: We do have some, but not as much.
Speaker Change: So a part of it is what's channels, you know, so like we had growth in the dollar channel. You know, I'm not sure if that's captured in Nielsen, right, which is explains, you know, part of what you're talking about in Walmart. And so if we look at the data that we.
Laurence Winoker: With that, I will now turn the call over to Larry. Thanks Rob. As we reported this morning, the net loss for the second quarter of 2024 was 18.2 million or 85 cents per diluted share as compared to $6.5 million loss for 31 cents per diluted share in the second quarter of 23. The net loss of the current period included a non-cash loss of 14.2 million related to our investment in Grupo Vesconia.
Robert Kay: Which explains part of what you're talking about. In Walmart, and so if we look at the data that we purchase, and we compare that on a 12 month versus 12 month basis this year versus last year, Not every category, but by far the majority of our categories, we've increased share. In Walmart and Target, we've gained in a lot of areas, but we did, as I've talked about, lose some share in the KitchenAid line with those retailers, which we saw an impact on a year-over-year basis in the second quarter alone, right, so just those three months, and that might be skewing what you see versus what we actually ship.
Speaker Change: purchase and we compare that on a 12-month versus 12-month basis this year versus last year.
Speaker Change: Not every category, but by far the majority of our categories, we've increased share.
Speaker Change: In Walmart and Target, we've gained in a lot of areas, but we did, as talked about, we lost some share.
Laurence Winoker: Adjusted net loss was 0.6 million for the second quarter of 2024 or 3 cents per deluded share compared to 0.3 million or 2 cents per deluded share in 2023. Income from operations was 1.2 million in the second quarter of 2024 as compared to income of 4.4 million in the 2023 period. Adjusted income from operations for the second quarter of 2024 was 5.6 million compared to 8.4 million in the 2023 period. And adjusted EBITDA for the trailing 12 month period ended June 34, was 56.6 million.
Speaker Change: in the KitchenAid line with those retailers, which we saw an impact on a year-over-year basis in the second quarter alone, right, so just those three months, and that might be skewing what you see versus what we actually shipped.
Linda Bolton: Okay, and then Given, I guess we're expecting around $6 million in shipments of Dolly Parton, at least maybe more in the second half, I would think more of that would come in the third quarter than in the fourth quarter. So is it fair to say your sales growth and year over year change in the third quarter will be maybe better than in the fourth quarter? Is that a right thing for me to assume?
Speaker Change: Okay. And then, um...
Speaker Change: I guess we're expecting around $6 million of shipments of the Dolly Parton, at least, maybe more in the second half.
Speaker Change: I would think more of that would come in the third quarter than in the fourth quarter. So is it fair to say your sales growth and year-over-year change in third quarter will be maybe better than in fourth quarter? Is that a right thing for me to assume?
Laurence Winoker: Adjusted net loss adjusted income from operations and adjusted EBITDA a non-gap financial measures which are reconciled to our gap financial measures in the earnings release.
Robert Kay: It's a good question, but I don't have the answer.
Laurence Winoker: Following comments were for the second quarter of 2024 and 2023 unless stated otherwise. Consolidated sales declined by 3.2 percent. US segment sales decreased by 3.3 percent to 130.5 million. The drop comments that commented macroeconomic pressures have led to weakened demand across end markets. Within the segment that decrease occurred in the kitchenware and home solutions categories. Kitchenware decline was from kitchen tools and measurement products. Home solutions decline was due to lower hydration products and tailor bath measurement products.
Speaker Change: It's a good question. I don't have the answer. I can say that we will exceed the $10 million, so you can expect more than the $6 million.
Linda Bolton: I can say that we will exceed $10 million. So you can expect more than $6 million. And we're not sure how that all falls in the third quarter versus the fourth quarter yet. We're still working on that based upon, again, time of shipments and the like. Most of it is replenishment. So the majority of that comes through our warehouses, not... you're not directed towards. So it's working with the customers and when it shifts, so that's not necessarily the case.
Speaker Change: And we're not sure how that all falls in third quarter versus fourth quarter yet. We're still working on that based upon, again, the time of shipments and the like. Most of it is replenishment. So the majority of that comes through our warehouses, not...
Speaker Change: you're not trusted for time
Speaker Change: So it's working with the customers and when it ships, so that's not necessarily the case.
Laurence Winoker: The second decrease was partially offset by sales for a new licensed product brand in the kitchenware and home solution categories and an increase in the tableware category from a new warehouse club program. International segment sales from down by 2.6 percent or 0.2 million or 0.3 million in constant US dollars to 11.2 million. As Rob commented the impact of the UK's economic recession has persisted which has prevented a meaningful recovering demand. The decrease was due to lower punishment orders for e-commerce and brick and mortar customers partially offset by higher sales in Asia.
Robert Kay: And then my last question has to do with when you talked about a little bit of a change in your marketing focus in Europe to go a little bit more for the larger retailer accounts instead of the smaller ones. I'm wondering if that changes the margin profile of the business there. Do you expect similar margins, lower or higher as you kind of change that channel strategy? Thanks. Yeah, no, good question.
Speaker Change: ok
Speaker Change: And then my last question has to do with when you talked about a little bit of a change in your marketing focus in Europe to go a little bit more for the larger retailer accounts instead of the smaller ones.
Speaker Change: I'm wondering if that changes the margin profile of the business there. Do you expect similar margins or lower or higher as you kind of change that channel strategy? Thanks.
Robert Kay: Yeah, no, good question. So just to explain that the core businesses that Lifetime had acquired, you know, their core customers were independent stores and what's called cookshops, particularly in the UK. They're in big decline, so we've been shifting to the larger accounts, you know, like Dunelm and Next, who are doing well. And the growth in those has been offsetting the general growth or decline in the homeless market in there. In general, the answer definitely is yes, that the margins that you're selling to those customers should be lower than you're getting in a cook shop.
Speaker Change: Yeah, no, good question. So just to explain that the core businesses that Lifetime had acquired, you know, their core customers were independent stores and what's called cook shops, particularly in the UK, they're in big decline. So we've been shifting to the larger accounts, you know, like Dunelm and Next, who are doing well.
Laurence Winoker: Consolidated gross margin increased to 38.5 percent from 38.2 percent. US segment gross margin increased to 38.7 from 38.3 percent. This improvement was due to favorable product mix. For international gross margin which decreased to 36.6 percent from 37.7 was driven by higher mix of distributor sales to Australia. US segment distribution expenses as a percentage of goods ship from its warehouses with 9.5 percent for 2024 versus 9.7 percent in 2023. Lower freight out expenses more than offset the impact of lower shipments.
Speaker Change: and the growth in those have been offsetting the general growth or decline in the homeless market in there.
Speaker Change: In general, the answer definitely is yes, that the margins that you're selling to those customers should be lower than you're getting in a cook shop, though the caveat is...
Robert Kay: Though the caveat is the reason why we're not necessarily experiencing that, and what you're seeing flowing through the numbers is that we've cleaned up a lot of business and improved the gross margin on what we sell, and you know in terms of what we're selling product wise. So that's picking up and offsetting what you're seeing; otherwise, if you were just substituting one for the other, you would have seen a bigger decline in margins.
Speaker Change: The reason why we're not necessarily experiencing that and what you're seeing flowing through the numbers is we've cleaned up a lot of business and improved the gross margin in what we sell and you know, in terms of what we're selling product wise. So that's picking up
Speaker Change: and offsetting what you're seeing. Otherwise, if you were just substituting one for the other, you would have seen a bigger decline in margin.
Laurence Winoker: Despite inflationary pressures continuous improvements in labor and other expense management and lower inventory levels mitigated the impact. International segment distribution expenses as a percentage of goods ship from its warehouses with 25.1 percent for both 24 and 23. As higher occupancy costs were offset by favorable freight rates.
Linda Bolton: Yeah, yeah, thank you. Thanks very much and good luck with everything.
Speaker Change: Does that make sense, Linda? Yeah, yes, thank you. Thanks very much and good luck with everything. Thank you.
Brian McNamara: Your next question comes from the line of Brian McNamara with Kanarog Genuity. Please go ahead.
Speaker Change: Your next question comes from the line of Brian McNamara with Kanarog Genuity. Please go ahead.
Brian McNamara: Good morning guys, thanks for taking the questions. Thanks, Brian, for being here. So sales growth has proven a bit elusive over the last few years, kind of post COVID, and your H2 guide, I think, implies a plus 8% kind of run rate. What gives you confidence in that kind of hockey stick recovery, particularly with 4 million Dolly Parton products maybe being pulled ahead as we haven't seen any kind of growth like that since 2021?
Brian McNamara: Good morning, guys. Thanks for taking the questions.
Laurence Winoker: Consolidated, Selling, General, and Administrative Expenses increased by 6.7% at 38.3 million. US segment expenses increased by 2 million to 29.4 million as a percentage of net sales expenses increased to 22.5% from 20.3%. The increases are driven by inflationary factors most of which related to employee cost, the largest component of SGNA. Other increases included expenses related to the startup of manufacturing operations in Mexico. This was partially offset by a decrease in the provision for doubtful accounts.
Speaker Change: Thanks Brian for being here.
Brian McNamara: So sales growth has proven a bit elusive over the last few years, kind of post-COVID, and your H2 guide I think implies a plus 8% kind of run rate. What gives you confidence in that kind of hockey stick recovery, particularly with 4 million of Dolly Parton product maybe being pulled ahead as we haven't seen kind of growth like that since 2021?
Robert Kay: So, two things that are driving that, I guess three things. One is just seasonal timing on a year-over-year basis, right? So some of it is what ships first half of the year 23 versus second half of 23, and the cadence of what's shipping this year.
Speaker Change: So, two things that are driving that, I guess three things, you know, one is just seasonal timing on a year-over-year basis, right? So it's...
Speaker Change: Some of it is what shipped.
Laurence Winoker: International SGNA expenses decreased by 0.2 million to 3.8 million and as a percentage of net sales it decreased to 33.9% from 35.1%. The decrease is driven by lower advertising and commission expenses, partially offset by higher employee expenses. An allocated corporate expenses increased by 0.6 million to 5.1 million due to high incentive compensation and professional fees. Our interest expense excluding market adjustment for swaps decreased by 0.3 million due to lower average borrowings partially offset by higher interest rates on our variable rate debt.
Speaker Change: First half
Brian McNamara: 23
Brian McNamara: versus second half 23 and the cadence of what's shipping this year.
Robert Kay: So that's driving some of the growth. Some of it is newness, such as Dolly, which is all incremental business. A little bit is we changed a lot of what we were doing online, which we were doing fine in terms of our e-commerce sales. And we've already seen a tremendous outperformance and that should continue. And we have a high degree of confidence in executing on that, which will drive that. And the other is just as we continue to roll out while the markets that we're particularly in. Europe and the continent and the UK, you know, have, we don't expect that to pick up.
Brian McNamara: So that's driving, you know, some of the growth. You know, some of it is newness.
Brian McNamara: such as Dolly.
Brian McNamara: which is all incremental business.
Brian McNamara: A little bit is we changed a lot of what we were doing online, which we were doing fine.
Brian McNamara: in terms of e-commerce sales and we've already seen tremendous outperformance and that is should continue and we have a hydrov confidence in executing on that which are drive back and the other is just as we continue to roll out while
Laurence Winoker: As Rob discussed with respect to Vesconia, due to a reorganization resolution by Vesconia under the Mexico bankruptcy law, a company which we have a 24.7% investment, we determined that we no longer had significant influence over our investment. This resulted in the discontinuance of the use of the equity method of accounting. Upon discontinuation, 14.2 million of related foreign currency translation losses previously reported in accumulated the comprehensive loss statement or reclassified to the investment balance and then written off.
Brian McNamara: the markets that were particularly in
Speaker Change: europe in the continfent and u k now have we don't expect that to pick up the gain new listenings in the quare car for needle in australian new zealand we've
Robert Kay: We've gained new listings in Leclerc, Carrefour, Lidl, in Australia and New Zealand. We used to, through the way we went to market, we were basically selling only one brand to one customer. Now, granted, in Australia, there's one major retailer, and that's what was being sold to them. They're very big.
Speaker Change: used to
Speaker Change: Through the way we went to market, we were basically selling only one brand.
Brian McNamara: to one customer now granted in australia thereas one major retail and that's what was being sold that they're very big but now we're selling to many people and to that one major retailwe're selling many products in many brands so that's all just rolling through and we'll drive incremental versus are
Robert Kay: But now we're selling to many people, and to that one major retailer, we're selling many products and many brands. So that's all just rolling through, and we'll drive incremental growth versus prior use. So we're not expecting a market pick-up to drive growth.
Laurence Winoker: This write-up was non-cash and had no effect on our ongoing operations or business strategy. For income taxes in the current period, the effective income tax rate differs from the federal statutory rate primarily due to equity-based awards where the book expense exceeded the tax reduction and foreign losses for which no benefit was recognized. The effective tax rate for the prior quarter differs from the federal statutory rate primarily due to state and local tax expense, the impact of non-deductible expenses and foreign losses for which no tax benefit is recognized.
Brian McNamara: so we're not expecting a market pick up to drive
Robert Kay: What's your view on innovation in light of today's consumer expectations for products that kind of perpetually keep increasing? Are you guys investing more in R&D to kind of propel sustainable growth?
Speaker Change: What's your view on innovation in light of today's consumer expectations for products that kind of perpetually keeps increasing? Are you guys investing more in R&D to kind of propel sustainable growth?
Robert Kay: Without a doubt, and actually one of the things that I didn't really talk about that is driving substantial growth and will this year, based upon what we have in firm orders, is a company provision. We introduced a product for Farberware called Buildaboard, and it's been... unbelievably successful.
Speaker Change: Without a doubt, and actually one of the things that I...
Speaker Change: We didn't really talk about that as driving substantial growth.
Speaker Change: and will this year based upon what we have in firm orders is proposvision we introduced for farther where called builda board and it's been
Laurence Winoker: Turning to a balance sheet, it continues to be quite strong. As of June 30, 2024, our liquidity was approximately $119 million, which included cash plus availability under our credit facility and receivable purchase agreement. Since year end 2023, we further delivered our balance sheet reducing our net debt by $70 million. And as of June 30, of this year, our net debt due adjusted EBITDA leverage ratio was 3.3 times.
Robert Kay: It will be the single, we expect it when we add up all the numbers at the end of the year, the single biggest launch that Lifetime has ever made. And it's all incremental product and incremental business, obviously. Existing Customs. It's all U.S. We're going to look to expand that internationally, but at this point, it's all U.S.
Speaker Change: Unbelievably successful. It will be the single, we expect it, when we add up all the numbers at the year, the single biggest launch that Lifetime has ever made. And it's all incremental product and incremental business obviously too.
Speaker Change: Existing Customs. It's all U.S. We're going to look to expand that internationally, but at this point it's all U.S.
Laurence Winoker: As provided in the release, we are reiterating our financial guidance for the full year of 2024. Except for the non-cash loss of $14.2 million related to the investment in In 2024, financial guidance is as follows. Net sales of 690 to 730 million, adjusted income from operations of 49 to 54 million, adjusted net income of 15 million to 70 million, and adjusted even a 57.5 to 62.5 million.
Robert Kay: Alright, then just one more. International just continues to be kind of a tough slog there. I'm wondering if it still makes sense to be there despite your strong internal efforts to restructure the business. You've done a lot of work there.
Speaker Change: All right, then just one more. International, just...
Speaker Change: It continues to be kind of a tough slog there. I'm wondering if it still makes sense to be there despite your strong internal efforts to restructure the business. You've made a lot of effort there. It's a $55 million kind of annual run rate business despite these new listings that you're talking about.
Robert Kay: It's a 55 million kind of annual run rate business despite, you know, these new listings that you're talking about. Does it require too much management focus just given its size relative to the total business?
Speaker Change: Does it require too much management focus just given size relative to the total business?
Robert Kay: No, management focus is not the issue. There it is not training management resources. That is not the problem. We do recognize that we need to show progress there and take action accordingly based upon our rules.
Unknown Executive: This concludes our prepared comments.
Speaker Change: No, management focus is not the issue. There is not training management resources. That that is not the problem. We do recognize that we need to.
Unknown Executive: Operated, please open the line for questions. Thank you. At this time, I would like to remind everyone in order to ask a question, press far one on your telephone keypad.
Speaker Change: show progress there and take action accordingly based upon how it rolls out.
Anthony Lebiedzinski: And your first question comes from the line of Anthony Lebiedzinski with CWTZ skill ahead. Good morning, gentlemen, and thank you for taking the questions. So Robbie, you talked about the sluggish demand in the second quarter, also seasonal timing of shipments. Just wondering if you guys could provide any more details in regards to that, whether or not more of the sales decline was because of just market sluggishness or help us out maybe just understand as far as how the quarter progressed.
Brian McNamara: Okay, great. Thanks, guys. I appreciate the color. Thank you, Brian.
Speaker Change: Okay, great. Thanks, guys. Appreciate the call.
Brian McNamara: Thank you, Brian .
Operator: Again, if you would like to ask a question, press star 1 on your telephone keypad. There are no further questions. I will now turn the call over to Mr. Rob Kay for the closing remarks. Please go ahead. Thank you, Angela.
Speaker Change: Again, if you would like to ask a question, press star 1 on your colorful keypad.
Speaker Change: There are no further questions.
Speaker Change: I will now turn the call over to Mr. Rob Kay for the closing remarks. Please go ahead.
Robert Kay: Thank you, everyone, for listening to our call today and for participating in it and for your interest in Lifetime Brands. We hope that we were able to answer your questions about the second quarter and for the full year, and we look forward to further discussions with everyone in the future.
Rob Kay: Thank you, Angela.
Rob Kay: Thank you everyone for listening to our call today and for participating in this and your interest in Lifetime Brands. We hope that we were able to answer your questions on the second quarter and for the full year and we look forward to further discussions with everyone in the future.
Anthony Lebiedzinski: As we talked about in our remarks, we had saw a lot of this coming when we issued the full-year guidance. So we, you know, directly we were not surprised. The end market demand was a little greater than we thought, offset by some new initiatives, particularly Dali and success in growing our e-commerce sales offset that. And our market shares, as we talked about, overall increased which, again, offset the greater market direction. Aside from that, and as we had expected, some timing, which particularly applies to club, which are sizeable orders on a year-over-year basis, will be second half, whereas we had more in the first half of the year, last year, in that channel.
Operator: That concludes today's call. Thank you all for joining us. You may now disconnect.
Rob Kay: Have a good day
Speaker Change: That concludes today's call. Thank you all for joining. You may now disconnect.
Anthony Lebiedzinski: And that accounts for the remainder of the client in the second quarter of that entire time. Okay, you've got it. That's probably helpful. And in terms of Dali Parton products, I mean, did I miss? Did you guys say how much of that was in the second quarter? Was it anything materials? It's a call-out. We didn't expect it to be that much, but we ended up shipping $4 million in the second quarter.
Anthony Lebiedzinski: Gotcha. Okay. So for the full year, I think you said you expect to exceed $10 million for Dali Parton products? Correct. Into the Dollar Channel. We may have some sales beyond the Dollar Channel. That will hit $24. Not certain yet, whether that will hit $24 and $25 based upon availability, since it's exceeded our expectations, getting available to you. And then you know, how would you characterize your own inventories and inventory at retail?
Anthony Lebiedzinski: You know, one of your competitors last month came out with lower than expected results. And you know, they had some own internal issues, but they had talked about a, you know, just seeing kind of a stretched consumer out there. So, you know, what are your thoughts there as far as, you know, inventory at retail? And retailers and retailers willingness to replenish orders. What are your thoughts? Sure. Well, the first part of your question in terms of our own inventories, we've been very focused on the inventories for years now and our inventory levels are appropriate.
Anthony Lebiedzinski: And we react very quickly with any changes in volumes, as well as on it, whether it's a few level or other basis, such as with the out performance of dolly, we react very quickly to get more into it. So, we think our inventory levels are appropriate and stream-wiring. In the UK, we've needed to, and Europe, or hub in the Netherlands, we've needed to increase those levels as a result of the fact that shipments are now coming around to Cape and not through the canal.
Anthony Lebiedzinski: And the Red Sea, and that adds a couple of weeks, so you need to offset that by counting higher levels. Inventory is not significant, but definitely higher levels. So, we've increased there in terms of the bulkier question of at retail, you know, in more challenging economic times, particularly the larger and the more sophisticated retailers lower their investment. And want more replenishment from their customers. A bigger player like us, it actually benefits our market position.
Anthony Lebiedzinski: But, you know, there has been definitely a shift, and we've seen that for quite some time, and that always gives a leading indicator of where we see the markets going. So, there's definitely some pullback in levels at most of our customers. So, they are leaner on inventory levels than they have been in better times. Gotcha. Okay. And then last question for me. So, as we look to update our models for Q3 and Q4, you know, is there anything that we should be aware of in terms of just timing of shipments other than what you already talked about, or is there anything timing of cost that we should be aware of?
Anthony Lebiedzinski: No, I mean, nothing that we haven't stated. You know, the big cost increase to size, besides, you know, overall, you know, inflation. The big cost increase has been ocean freight, which we haven't experienced as we mentioned. It's stabilized. We don't expect it to change from where it is. So, year-to-year basis, social freight is up. Stabilize at a level less than our expectations, which is good, so we factor that all in. And we don't expect it to change much.
Anthony Lebiedzinski: And the big driving factor is in geopolitical conditions. The big driving factor are the ocean carriers, and them taking a lot of tonnage offline. And they, of course, fly in demand. It created an increase, in the cost that they were able to charge. We've offset that, particularly on a cost of good sold basis by driving the cost of what we're paying for our goods. So there should be no change beyond our expectations, and from a time of perspective, there is some upside if we can get more product for demand on-dollity, but in a base you have to pay the cost. Okay, well, thank you very much and best of luck. Thank you, Anthony.
Linda Bolton: Your next question comes from the line of Linda Bolton. We sir, the A. David's, please go ahead. Yes, hello, hi. So I was just curious, if you could give us an update on the swell acquisition, sort of a state of view on how that brand is doing since you acquired it. As we talked about at the time of the acquisition, the biggest known challenges centered around the stuff that are overseas channels, as well as e-commerce at the Amazon.
Linda Bolton: So we neither be a lag. That's all I'm through, and therefore it's picked up as a result. The other thing that has been successful is, and if you go on our websites and social media, you'll notice there's been a tremendous amount of new page introduction because we inherited no pipeline, basically. So that's created unions, which is driving new opportunities, particularly in the e-commerce channel, where when you're just selling the same thing, it becomes a decline in your demand.
Linda Bolton: But now that we've replenished the offering, we've seen both in swell.com, Amazon and other channels, a nice uptake. One thing we did not anticipate when we bought the business is that we were very interested and we find the promotional direct corporate channel that's well had to be very attractive, and we got a lot of talent with that. The talent was exceeded our expectations, but the relationships that they were selling through needed to be completely redone, that's why we took a charge last year, and that's this year we're doing much better and we've seen a tremendous increase in that health actually in second quarter, as we've solved the issues that we faced last year, and did that in a manner that exceeded our expectations.
Linda Bolton: So as well as doing well, we need to, with that division, the whole build and swell division is one division. There has been, with the tremendous growth of Stanley, the category has done well, but besides Stanley, most people have not. There's been a decline in share, so we've been winning back some share, and that should benefit us on the Goldflowers base. Okay, and then, you know, we get the Nielsen data, the POS data which covers just the US and it doesn't include e-commerce, so it's only track channels, so it only covers some of your sales.
Linda Bolton: But nevertheless, it shows a really bad trend, like really big year of year declines. You know, so this would be a Walmart and Target, you know, other channels. Is there any way you can explain to us why the declines in the Nielsen data look so much bigger than the decline in revenue you actually report? So, again, it's what covered, we purchased a lot of data and it's all Serkana data, right, so NPDIRI, and that covers a lot of the universe.
Linda Bolton: There is to your point less data overseas, we do have some, but not as much. So, part of it is what's channels, you know, so like we had growth in the dollar channel, you know, I'm not sure if that's captured in Nielsen, right, which explains, you know, part of what you're talking about in Walmart. So, if we look at the data that we purchase, and we compare that on a 12 month, first 12 month basis this year versus last year, not every category by far the majority of our categories we've increased share.
Linda Bolton: In Walmart and Target, we've gained in a lot of areas, but we did, as talked about, we lost some share in the KitchenAid line with those retailers which we saw an impact on a year or year basis in the second quarter of the night, just those three months. And that might be skewing what you see versus what we have to shift. Okay, and then given, I guess we're expecting around $6 million of shipments of the Dolly part and at least maybe more in the second half, I would think more of that would come in the third quarter than in the fourth quarter.
Linda Bolton: So, is it fair to say your sales growth and year of year change in third quarter will be maybe better than in fourth quarter? Is that a right thing for me to assume? It's a good question. I don't have the answer. I can't say that we will exceed the 10 million, right, so you can expect more than the six. And we're not sure how that all falls in the third quarter versus fourth quarter yet was still working on that based upon, again, time of shipments and most of it is replenishment. So, the majority that comes to our warehouses, not directed work. So, it's working with the customers and when it ships, so that's not necessarily the case.
Robert Kay: Okay, and then my last question has to do with when you talk about a little bit of a change in your marketing focus in Europe to go a little bit more for the larger retailer accounts instead of the smaller ones. I'm wondering if that changes the margin profile of the business there. Do you expect similar margins or lower or higher as you kind of change that channel strategy?
Robert Kay: Thanks. Yeah, now a good question. So, just to explain that the core businesses at Lifetime had acquired, you know, their core customers were independent stores and let's call cook shots for taking the UK. They're in big decline. So we've been shifting to the larger accounts, you know, like Don Almannex who are doing well. And the growth in those that have been offset in the general growth or decline in the homeless markets in there.
Robert Kay: In general, the answer definitely is yes, that the margins that you're selling to those customers will be lower than you're getting in a cook shop. Though the caveat is the reason why we're not necessarily experiencing that, what you're seeing flow into the numbers is we've cleaned up a lot of business and improved the gross margin in what we sell in terms of what was on product-wise. So that's picking up and offsetting what you're seeing otherwise, if you were just substituting one for the other, you wouldn't have seen a bigger decline in margin. Does that make sense, Linda?
Linda Bolton: Yeah, yeah, thank you. Thanks very much and good luck with everything.
Unknown Executive: Thank you.
Brian McNamara: Your next question comes from the line of Brian McNamara. It's Canada. Can you any please go ahead? Good morning, guys. Thanks for taking the questions. Thanks for being here. So salesgirl, this proven a bit elusive over the last few years, kind of post-COVID and your H2 guide, I think implies a plus 8% kind of run rate.
Robert Kay: What gives you confidence in that kind of hockey stick recovery, particularly with 4 million of dolly part and product maybe being pulled ahead, as we haven't seen kind of growth like that since 2021? So two things that are driving that, I guess three things. One is just seasonal timing on a year-over-year basis. So it's, some of it is what shipped first half, 23 versus second half, 23 and the cadence of what's shipping this year.
Robert Kay: So that's driving some of the growth. Some of it is newness, such as dolly, which is all incremental business. A little bit is we changed a lot of what we were doing online, which we were doing fine, in terms of our e-commerce sales, and we've already seen tremendous outperformance, and that is should continue, and we have a high degree of confidence in executing on that, which would drive that. And the other is just as we continue to roll out, while the markets that were particularly in Europe and the continent in the UK we don't expect that to pick up.
Robert Kay: We've gained new listings in the clear car for Lido in Australia and New Zealand. We used to, through the way we went to market, we were basically selling only one brand to one customer, now granted in Australia there's one major retail, and that's always being sold there, they're very big. But now we're selling to many people, and to that one major retail we're selling many products and many brands. So that's all just rolling through, and we'll drive increment of growth versus hiring.
Robert Kay: So we're not expecting a market pick-up to drive this Okay, what's your view on innovation and light of today's consumer expectations for products that kind of perpetually keeps increasing? Are you guys investing more in R&D to kind of propel sustainable growth? With Added Out and actually one of the things that I didn't really talk about that is driving substantial growth and will this year, based upon what we have in firm orders, we introduced for far more where it's called Build-A-Board and it's been unbelievably successful.
Robert Kay: We expect it when we add up all the numbers that the year, the single biggest launch that Lifetime has ever made, and it's all incremental product and incremental business obviously to exist in countries. It's all U.S., we're going to look to expand that internationally, but it's disappointing to all U.S.
Robert Kay: All right, then just one more, international just continues to be kind of a tough slog there. I'm wondering if it still makes sense to be there, despite your strong internal efforts to restructure the business, you've made a lot of effort there. It's a 55 million kind of annual run rate business, despite these new listings that you're talking about. Does it require too much management focus just given size relative to the total business?
Robert Kay: No, management focus is not the issue. There is not training management resources. That is not the problem. We do recognize that we need to show progress there and take action accordingly based upon how it rolls out.
Brian McNamara: Okay, great. Thanks, guys. Appreciate the color. Thank you, Brian. Again, maybe we'd like to ask a question for a star one on your telephone keypad. There are no further questions.
Robert Kay: I will now turn the call over to Mr. Rob K for the closing remarks. Please go ahead. Thank you, Angela. Thank you, everyone, for listening to our call today and for participating in this and your interest in lifetime brands. We hope that we were able to answer your questions on the second quarter and for the full year and we look forward to further discussions with everyone in the future.
Unknown Executive: Have a good day.
Unknown Executive: That concludes today's call. Thank you all for joining.
Unknown Executive: You may now disconnect.