Q4 2024 Hamilton Beach Brands Holding Co Earnings Call

Operator: Thank you for standing by. At this time, I would like to welcome everyone to today's Hamilton Beach Brands fourth quarter 2024 earnings conference call.

Thank you for standing by at this time I would like to welcome everyone to today's Hamilton Beach Brands' fourth quarter 2024 earnings Conference call. All lines have been placed on mute to prevent any background noise.

Operator: All lines have been placed on mute to prevent any After the speaker's remarks, there will be a Q&A session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Once again, star one. And if you'd like to withdraw your question, simply press star one again. Thank you.

After the Speakers' remarks, there will be a Q&A session, if you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad once again star one and if you'd like to withdraw your question simply press Star one again. Thank you.

Brendan Frey: So without further ado, I would like to turn the call over to Brendan Frey, partner with ICDR. Brendan, you have the floor. Thank you, Greg.

Speaker Change: So without further Ado I would like to turn the call over to Brendon Frey partner with ICR Brendan you have the floor.

Speaker Change: Thank you Greg Good afternoon, everyone and welcome to the fourth quarter 2024 earnings conference call and webcast for Hamilton Beach brands.

Scott Tiety: Good afternoon, everyone, and welcome to the fourth quarter 2024 Earnings Conference Call and webcast for Hamilton Beach. Earlier today, after the stock market closed, we issued our fourth quarter 2024 earnings release, which is available on our corporate website.

Speaker Change: Earlier today after the stock market closed we issued our fourth quarter 2024 earnings release, which is available on our corporate website.

Scott Tiety: Our speakers today are Scott Tiety, President and CEO, and Sally Cunningham, Senior Vice President, Chief Financial Officer, and Treasurer. Our presentation today includes four looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in either our prepared remarks or during the Q&A.

Sally Cunningham: Our speakers today are Scott Tidy, President and CEO, and Sally Cunningham Senior Vice President Chief Financial Officer and Treasurer.

Sally Cunningham: Our presentation today includes forward looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in either our prepared remarks.

Sally Cunningham: During the Q&A.

Scott Tiety: Additional information regarding these risks and uncertainties is available in our 10-Q, our earnings release, and our annual report on Form 10-K for the year ended December 31, 2023, and soon-to-be-filed Form 10-K for the year ended December 31, 2021. The company disclaims any obligation to update these forward-looking statements, which may not be updated until our quarterly conference call, our next quarterly conference call if at all.

Sally Cunningham: Additional information regarding these risks and uncertainties is available in our 10-Q, our earnings release and our annual report on Form 10-K for the year ended December 31, 2023, and soon to be filed Form 10-K for the year ended December 31st 2024, the company disclaims any obligation to update.

Sally Cunningham: These forward looking statements, which may not be updated until our quarterly conference call. Our next quarterly conference call. If at all the company will also discuss certain non-GAAP measures reconciliation for regulation G purposes can be found in our earnings release.

Scott Tiety: The company will also discuss certain non-GAAP measures. Reconciliation for Regulation G purposes can be found in our earnings.

Scott Tiety: And now I'll turn the call over to Scott. Thank you, Brendan, and good afternoon, everyone. Thank you for joining us today.

Scott: And now I'll turn the call over to Scott Scott.

Scott: Thank you Brendan and good afternoon, everyone. Thank you for joining US today, we are pleased with our fourth quarter results, which represented a solid finish to a successful year. Our Q4 performance was highlighted by low single digit growth and profitability that exceeded our expectations.

Scott Tiety: We are pleased with our fourth quarter results, which represented a solid finish to a successful year. Our Q4 performance was highlighted by low single-digit growth and profitability that exceeded our expectations. Importantly, we maintained strong gross margins north of 26% despite a promotionally driven market environment during the holidays as consumers remained selective with discretionary spending. These achievements reflect our team's focus on operational excellence as we continue to drive top-line expansion while maintaining the incremental leap in gross margin we've taken this year.

Scott: Expectations.

Scott: Importantly, we maintained strong gross margins north of 26%, despite a promotional driven market environment during the holidays as consumers remain selective with discretionary spending these achievements reflect our team's focus on operational excellence as we continue to drive top line expansion, while maintaining the incremental leap and gross margin.

Scott: We've taken this year.

Scott Tiety: Looking at our full year performance, I'm very proud of our team's accomplishments. We delivered strong financial results across our key metrics. Revenue increased mid-single digits, driven by successful new product launches and new points of distribution. We expanded gross margins by 300 basis points and grew operating profit 23%. Our focus on operational efficiency and working capital management yielded strong cash flow results as well. We generated more than $65 million in the operating cash flow, which speaks to the underlining strength of our business model and our team's execution. This robust cash generation, combined with our disciplined approach to capital allocation, allowed us to end 2024 in a net cash position, a significant achievement that was accomplished while continuing to return value to shareholders through both share repurchases and our dividend program.

Scott: Looking at our full year performance I'm very proud of our team's accomplishments we delivered strong financial results across key across our key metrics revenue increased mid single digits, driven by successful new product launches and new points of distribution.

Scott: Expanded gross margins by 300 basis points and grew operating profit 23%.

Scott: Our focus on operational efficiency and working capital management yielded strong cash flow results as well, we generated more than 65 million in operating cash flow, which speaks to the underlying strength of our business model and our team's execution.

Scott: This robust cash generation combined with our disciplined approach to capital allocation allowed us to end 2024, and a net cash position a significant achievement that was accomplished while continuing to return value to shareholders through both share repurchases and our dividend program.

Scott Tiety: Along with these strong operating results, we took decisive action to add new opportunities to our growth plans, led by further expansion into the healthcare market through our acquisition of HealthBeacon last February. We also took steps to diversify our manufacturing and sourcing to further reduce our exposure to China. This work was not only additive to our 2024 performance, but it's a position the company to maintain its top-line momentum and recent gains we've made in our margin profile.

Scott: Along with these strong operating results, we took decisive action to add new opportunities to our growth plans led by further expansion into the health care market through our acquisition of health, peaking last February.

Scott: We also took steps to diversify our manufacturing and sourcing to further reduce our exposure to China.

Scott: This work was not only additive to our 2020 for performance, but it's a position the company to maintain its top line momentum and recent gains we've made in our margin profile.

Scott Tiety: As we've discussed previously, we continue to execute against six strategic initiatives, which serve as the blueprint for driving long-term growth and shareholder value for Hamilton Beach brands. These strategies include driving core growth, gaining share in the premium market, leading in the global commercial market, accelerating growth of Hamilton Beach Health, accelerating our digital transformation, and leveraging partnerships and acquisitions.

Scott: As we've discussed previously we continue to execute against six strategic initiatives, which serve as a blueprint for driving long term growth and shareholder value for Hamilton Beach brands. These strategies include driving core growth.

Scott: Gaining share in the premium market, leading in the global commercial market accelerating growth of Hamilton Beach help accelerating our digital transformation and leveraging partnerships and acquisitions.

Scott Tiety: Today, I'd like to review the key drivers of our 2024 success in support of these initiatives. Starting with our success, introducing innovative new products and platforms to help drive future share gains in our core business. As many of you know, Hamilton Beach Brands has a long track record of bringing innovative new products to market. Our new product introductions over the past few years have performed very well, helping us to gain share in both the U.S. and in our international markets. In 2024, our U.S. consumer business grew 3.6 percent, outpacing the overall market percent. We saw even greater growth in our Mexico and Latin America business, led by strong gains in Mexico, where Hamilton Beach moved up several spots to capture the number three small appliance brand in December.

Scott: Today I'd like to review the key drivers of our 2020 for success in support of these initiatives starting with our success introducing innovative new products and platforms to help drive future share gains in our core business.

Scott: As many of you know Hamilton Beach brands has a long track record of bringing innovative new products to market.

Scott: Our new product introductions over the past few years have performed very well, helping us to gain share in both the U S and in our international markets.

Scott: In 2020 for our U S consumer business grew three 6% outpacing the overall market percent, we saw even greater growth in our Mexico, and Latin America business led by strong gains in Mexico, where Hamilton Beach moved up several spots to capture the number three small appliance brand in December.

Scott Tiety: A great example of new product innovation driving our recent performance is the Flex Brew Coffee Maker. The Flex Brew Advanced 5-in-1 Coffee Maker offers consumers unprecedented versatility with five ways to brew, a space-saving design with one footprint, and the ability to wake up to either a fresh-brewed single cup or 12 cups. Additional features include a dual-position 60-ounce water reservoir, fast brewing capabilities that can brew a single cup in less than two minutes, an easy-to-use LED touchscreen, and convenient cleaning features.

Scott: A great example of new product innovation driving our recent performance is the flex brew coffee maker the flex brew advanced five in one coffeemaker offers consumers unprecedented versatility with five ways to Peru.

Scott: Saving design with with one footprint and the ability to wake up to either a fresh fruits single Cup or 12 Cups. Additional features include a dual positioned 60 ounce water reservoir SaaS brewing capabilities that can brew a single cup in less than two minutes and easy to use led touch screen and convenient cleaning features.

Scott Tiety: New products also help us gain share in categories such as blenders, irons, and slow cookers. Along with these new exciting innovations, we also accelerated our efforts to increase our share of large and underpenetrated categories in 2024. Starting with our premium brand strategy, HB operates a powerful portfolio of premium-owned and licensed small appliance brands including Brita, Qi, and Clorox, which accounted for a mid-teens percentage of our overall revenue in 2024. Looking ahead, this represents both an attractive growth and margin expansion opportunity as we are still less than 3% penetrated in the $4 billion U.S. premium market.

Scott: New.

Scott: <unk> also helped us gain share in categories, such as blenders irons and slow cookers.

Scott: Along with these new exciting innovations, we also accelerated our efforts to increase our share of large and underpenetrated categories in 2024.

Scott: Starting with our premium brand strategy HP operates a powerful portfolio of premium owned and licensed small plants brands, including Brita, She and clorox, which accounted for a mid teens percentage of our overall revenue in 2024.

Scott: Looking ahead. This represents both an attractive growth and margin expansion opportunity as we are still less than 3% penetrated in the 4 billion U S premium market.

Scott Tiety: Consumers reacted positively to several of our premium product introductions in 2024. Our new plant-based milk maker, which offers consumers the ability to create a variety of fresh milk on demand, continues to gain traction. This product perfectly aligns with the current consumer trends towards healthier, more sustainable options. We've seen particular interest from health conscious consumers who appreciate the ability to create fresh, preservative-free, plant-based milks at home. Our Qi Clothes Steamer line has been another success story. We leveraged Qi's strong reputation in the beauty and personal care market to create an innovative garment care products. The Qi Vibes Garment Steamer, in particular, has been a hit.

Scott: Consumers reacted positively to several of our premium product introductions in 2024.

Scott: Our new mill plant based milk maker, which offers consumers the ability to create a variety of fresh milk on demands continues to gain traction this product perfectly aligns with the consumer with the current consumer trends towards healthier more sustainable options. We've seen particular interest from health conscious consumers, who appreciate the ability to create fresh.

Scott: Preservative free plant based milks at home.

Scott: Our key close steamer line has been another success story, we levered cheese, we leveraged cheese strong reputation in the beauty and personal care market to create an innovative garment care products. The Chi vibes garment steamer in particular has been a hit its compact lightweight and heats up in just 35 seconds.

Scott Tiety: It's compact, lightweight, and heats up in just 35 seconds, making it the perfect for both home use and travel. We've incorporated Qi's Signature Lava Technology, which provides exceptional heat conductivity, giving consumers professional-grade wrinkle removal in a convenient, portable package.

Scott: Perfect for both home use and travel we've.

Scott: We've incorporated cheese, LABA Cigna signature lava technology, which provides exceptional heat conductivity, giving consumers professional grade wrinkle removal and a convenient portable package.

Scott Tiety: The Clorox air purifier line also performed exceptionally well. We introduced our largest ever room air purifier this year, featuring an ultraviolet light that provides an additional layer of air purification. The product has resonated with consumers increasingly concerned about indoor air quality. We've expanded the Clorox line to include a countertop seam sanitizer and a humidifier, providing a comprehensive approach to home air and surface health.

Scott: The Clorox Air Purifier align also performed exceptionally well, we introduced our largest ever room air Purifier. This year, featuring an ultraviolet light that provides an additional layer of air purification the.

Scott: The product has resonated with consumers increasingly concerned about indoor air quality. We've expanded the clorox lines include a countertop seem sanitizer and a humidifier, providing a comprehensive approach to home air and surface health.

Scott Tiety: 2024 also saw us work to increase share in our commercial business. While this still, while this segment is still relatively a small portion of our overall revenue, it represents another large and under penetrated opportunity.

Scott: 2024 also source work to increase share in our commercial business, while there's still while this segment is still relatively a small portion of our overall revenue. It represents another large and underpenetrated opportunity.

Scott Tiety: A highlight for our commercial business in 2024 was the performance of our summit edge blender, where sales increased more than 50% as we secured placement and a leading convenience store chain with over a thousand locations and a global coffee retailer with more than 25,000 stores. The Summit Edge High Performance Blender delivers speed of service and one-touch convenience perfect for high-volume commercial environments. Whether blending acai bowls, green smoothies, protein shakes, or iced coffee drinks, the Summit Edge creates a smooth, creamy profile every time.

Scott: Highlight for our commercial business in 2024 was the performance of our summit edge, Blender, where sales increased more than 50% as we secure placement.

Scott: And a leading convenience store chain with over 1000 locations and a global coffee retailer with more than 25000 stores.

Scott: Summit edge high performance Blender delivers speed of service and one touch convenience perfect for high volume converged commercial environments, whether blending ICR bowls green smoothies protein shakes, our ice coffee drinks the summit edge creates a smooth creamy profile every time.

Scott Tiety: Key features include Power Blend technology, ultra-quiet operation with Quiet Blend technology, one-touch automatic blending, and an intuitive touchpad with optimized programs. And lastly, regarding our newest business segment, Hamilton Beach Health, we are excited about the prospects for expansion and further market penetration of this subscription-based high-margin business.

Scott: Key features include power blend technology ultra quiet operation with quiet blend technology, one touch automatic blending and an intuitive touch pad with optimized programming.

Scott: And lastly regarding our newest business segment Hamilton Beach Health, we are excited about the prospects for expansion and further market penetration of this subscription based high margin business since acquiring health Beacon in early 2024, we've been developing health care management tools, including remote therapeutic monitoring.

Scott Tiety: Since acquiring HealthBeacon in early 2024, we've been developing healthcare management tools, including remote therapeutic monitoring systems. Our first system, the SmartSharp Spin, is provided primarily through specialty pharmacies. Our growth plans include increasing our current patient subscription base of 32,000 by over 50% through existing or new specialty pharmacy customers and increasing the conditions treated using the system. To that end, we signed an agreement with OptumHealth in 2024 and look forward to launching this business next quarter. Across each of our businesses, we are focused on growing through our existing distribution and selectively expanding our physical and digital presence.

Scott: <unk> systems, our first system the smart sharp spin this provided primarily through specialty pharmacies. Our growth plans include increasing our current patient subscription base of 32000 by over 50% through existing or new specialty pharmacy customers and increasing the conditions treated using the system.

Scott: To that end, we signed an agreement with Optum health in 2024 and look forward to launching this business next quarter.

Across each of our businesses, we are focused on growing through our existing distribution and selectively expanding our physical and digital presence and 2024, we experienced solid growth with many of our major retail partners and commercial customers, our small consumer appliance brands sold through well led.

Scott Tiety: In 2024, we experienced solid growth with many of our major retail partners and commercial customers. Our small consumer appliance brand sold through well-led by mass market and leading specialty retailers. We also saw solid growth online as we continue to focus on accelerating penetration of this channel. This includes leading PurePlay e-commerce retailers, our own brand websites, and the digital sites of our brick and mortar partners. With respect to commercial, as I said earlier, we were successfully placing our Summit Edge Blender in over 3,500 total doors.

Scott: By mass market and leading specialty retailers. We also saw solid growth online as we continue to focus on accelerating penetration of this channel.

Scott: This includes leading pure play e-commerce retailers are owned brand websites and the digital sites of our brick by brick and mortar partners.

Scott: With respect to commercial as I said earlier, we were success, we were successfully placing our summit edge blender and over 3500 total doors. We also expanded our business with several large restaurant and hospitality changed in 2024 as.

Scott Tiety: We also expanded our business with several large restaurant and hospitality chains in 2024.

Scott Tiety: As we look ahead to the new year, we are excited about the opportunities we see across the core, premium, commercial, and health segments of our business. In our core business, we have a robust pipeline of new products that we believe will help us continue to gain market share, particularly in high-growth categories like specialty coffee and air fryers. We look to continue the expansion of our premium product offerings with several new innovative launches planned across our partnerships with Qi, Clorox, and the Bartesian brand. We will also accelerate our commercial business expansion, focusing on penetrating new channels and expanding our relationship with large restaurants and hospitality chains.

Scott: As we look ahead to the new year, we are excited about the opportunities we see across the core premium commercial and health segments of our business and our core business. We have a robust pipeline of new products that we believe will help us continue to gain market share, particularly in high growth categories like specialty coffee and air Fryers.

Scott: We look to continue the expansion of our premium product offerings with several new innovative launches planned across our partnerships with Chi Clorox and Novartis and brands. We also will also accelerate our commercial business expansion focusing on penetrating new channels and expanding our relationship with large restaurants and hospitality chain.

Scott: <unk>.

Scott Tiety: In our Hamilton Beach Health segment, we anticipate seeing the benefit of our OptumHealth partnership materialize, and we have plans to expand both our customer base and the conditions treated using our SmartSharp system. Additionally, we will continue to explore opportunities to leverage our digital capabilities across all business segments, with a particular focus on enhancing our e-commerce presence and direct-to-consumer channels. To help fuel these initiatives, we expect to meaningfully increase our marketing investment in 2025, which Sally will detail momentarily in her prepared remarks.

Scott: And our Hamilton Beach Health segment, we anticipate seeing the benefit of our Optum health partner Chip materialize, and we have plans to expand both our consumer base customer base and the conditions treated using our smart sharp system.

Scott: Additionally, we will continue to explore opportunities to leverage our digital capabilities across all business segments with a particular focus on enhancing our e-commerce presence and direct to consumer and direct to consumer channels.

Sally Cunningham: To help fuel these initiatives, we expect to meaningfully increase our marketing investment in 2025, which Sally will detail momentarily in her prepared remarks.

Scott Tiety: Before I turn it over to Sally, I want to quickly address tariffs, as I know this is top of mind for many investors. In 2023, we took proactive steps with our manufacturing and sourcing to mitigate tariffs. As of year-end, we have mitigated 35 percent of our business and are on track to mitigate another 25 to 35 percent this year.

Speaker Change: Before I turn it over to Sallie I wanted to quickly address tariffs as I know this is top of mind for many investors and 2023, we took proactive steps with our manufacturing and sourcing to mitigate tariffs.

Speaker Change: As of year end, we have mitigated 35% of our business and are on track to mitigate another 25% to 35%. This year. Additionally, we anticipate being able to offset the impact of higher tariffs through select price increases and supplier concessions being implemented in the first half of 2025.

Scott Tiety: Additionally, we anticipate being able to offset the impact of higher tariffs through select price increases and supplier concessions being implemented in the first half of 2025.

Scott Tiety: In closing, I want to thank our global team for their continued dedication and execution excellence throughout 2024. Their commitment to innovation and customer service has been instrumental in delivering these strong results. We enter 2025 with solid momentum across our business and remain focused on executing our strategic initiatives to drive sustainable, long-term growth, and shareholder value.

Speaker Change: In closing I want to thank our global team for their continued dedication and execution excellence throughout 2020 for their commitment to innovation and customer service has been instrumental in delivering these strong results. We entered 2000 and we enter 2025 was solid momentum across our business and remain focused on executing our strategic.

Speaker Change: Initiatives to drive sustainable long term growth and shareholder value.

Sally Cunningham: With that, I'll turn it over to Sally. Great. Thank you, Scott.

Sally Cunningham: With that I'll turn it over to Sally.

Sally Cunningham: Great. Thank you Scott good afternoon, everyone, starting with our fourth quarter 2024 result, compared to the fourth quarter of 2023.

Sally Cunningham: Good afternoon, everyone. Starting with our fourth quarter 2024 results compared to the fourth quarter of 2023. As Scott mentioned, we were pleased to deliver a solid finish to an outstanding year. Starting with revenue, total revenue in the fourth quarter was $213.5 million, a 3.3 percent increase over last year's fourth quarter. The increase was driven primarily by a favorable product mix, as well as higher volume, partially offset by expected average price decreases and foreign currency impact. Regionally, our North American consumer markets delivered solid growth, with most strength coming from the U.S. consumer market. These gains were partially offset by revenue declines internationally.

Sally Cunningham: As Scott mentioned, we were pleased to deliver a solid finish to an outstanding year.

Sally Cunningham: Starting with revenue total revenue in the fourth quarter was $213 $5 million or three 3% increase over last year's fourth quarter.

Sally Cunningham: The increase was driven primarily by a favorable product mix as well as higher volume, partially offset by expected average price decreases and foreign currency impacts.

Sally Cunningham: Regionally, our north American market.

Sally Cunningham: North American consumer market delivered solid growth with most strength coming from the U S. Consumer market. These gains were partially offset by revenue declines internationally.

Sally Cunningham: Also included in the fourth quarter was $1.7 million of revenue from our Health Deacon Acquisition. Turning to gross profit and margin, gross profit was $55.8 million in the fourth quarter compared to $55.3 million in the year-ago period. Gross profit margin was 26.1% compared to 26.8% of the total revenue in last year's fourth quarter. The contraction in gross profit margin in the current quarter was expected as we recently reduced prices on certain products after realizing the benefits of lower costs that positively impacted margins starting in the fourth quarter of 2023. We have made significant progress expanding gross margins, as evidenced by the step change from our historical range, which was in the low 20% range just a couple years ago, to consistently in the mid-20s over the past several quarters.

Sally Cunningham: Also included in the fourth quarter was $1 7 million of revenue from our <unk> acquisition.

Sally Cunningham: Turning to gross profit and margin gross profit was $55 $8 million in the fourth quarter compared to $55 3 million in a year ago period.

Sally Cunningham: Gross profit margin was 26, 1% compared to 26, 8% of the total revenue in last year's fourth quarter.

Sally Cunningham: The contraction in gross profit profit margin in the current quarter was expected as we recently reduced prices on certain products. After realizing the benefits of lower costs that positively impacted margins starting in the fourth quarter of 2023.

Sally Cunningham: We have made significant progress expanding gross margins as evidenced by the step change from our historical range, which is in the low 20% range just a couple of years ago.

Sally Cunningham: Consistently in the mid Twenty's over the past several quarters.

Sally Cunningham: Selling, general and administrative expenses increased $32.1 million. compared to $30.2 million in the fourth quarter of 2023. The increase was primarily driven by the addition of $2.1 million of health vegan partially offset by slightly lower employee-related expenses. Operating profit was $23.6 million compared to $25 million in the fourth quarter of 2020. Net interest expense in the fourth quarter $283,000 compared to $366,000 a year ago. due to lower debt levels and lower interest rates compared to the year ago period. Income tax expense was a $1 million benefit in the fourth quarter compared to an expense of $5.1 million a year ago.

Sally Cunningham: Selling general and administrative expenses increased $32 $1 million compared to $30 2 million in the fourth quarter of 2023.

Sally Cunningham: The increase was primarily driven by the addition of $2 $1 million of housekeeping expenses, partially offset by slow by slightly lower employee related expenses.

Sally Cunningham: Operating profit was $23 6 million compared to $25 million in the fourth quarter of 2023.

Sally Cunningham: Net interest expense in the fourth quarter decreased to $283000 compared to $366000 a year ago.

Due to lower debt levels, and lower interest rates compared to the year ago period.

Sally Cunningham: Income tax expense was a 1 million dollar benefit in the fourth quarter compared to an expense of $5 $1 million a year ago.

Sally Cunningham: The $6.1 million change in our tax expense is primarily due to a $4.3 million foreign tax benefit and a change in U.S. tax accounting. both of which will not recur going forward. Net income in the fourth quarter was $24 million, or $1.75 per diluted share, compared to a net income of $19.6 million, or $1.40 per diluted share, a year ago.

Sally Cunningham: The $6 $1 million change in our tax expense is primarily due to a $4 3 million dollar foreign tax benefit and a change in U S tax accounting method, both of which will not recur going forward.

Sally Cunningham: Net income in the fourth quarter was $24 million or $1.75 per diluted share.

Sally Cunningham: Impaired to a net income of $19 $6 million or $1 40 per diluted share a year ago.

Sally Cunningham: In terms of the full year, I won't go through the drivers of change in our performance, but want to quickly call out the operating highlights from our income statement. for 2024. Net revenue increased 4.6% to $654.7 million compared to $625.6 million. Gross margin increased 300 basis points to 26% compared to 23%, which I'll note is a record for Hamilton Beach since it became a stand-alone public company in 2017. An operating profit increased 23.1% to $43.2 million compared to $35.1 million. Our full year net income increased to $30.8 million, or $2.20 per share, compared to $25.2 million, or $1.80 per share, in 2020.

Sally Cunningham: In terms of the full year I won't go through the drivers of change in our performance, but want to quickly call out the operating highlights from our income statement.

Sally Cunningham: For 2024.

Sally Cunningham: Net revenue increased four 6% to $654 $7 million.

Sally Cunningham: Third to $625 $6 million.

Sally Cunningham: Gross margin increased 300 basis points to 26% compared to 23%.

Sally Cunningham: I'll now did a record for Hamilton Beach since it became a standalone public company in 2017.

Sally Cunningham: Operating profit increased 23, 1% to $43 2 million compared to $35 $1 million.

Sally Cunningham: Our full year net income increased to $38 million or $2 20 per share compared to $25 $2 million.

Sally Cunningham: Or $1 80 per share in 2023.

Sally Cunningham: 2024 net income includes the aforementioned foreign tax credit. and a change in U.S.

Sally Cunningham: 2024, net income includes the aforementioned foreign tax credit.

Sally Cunningham: And it's and a change in U S Tech tax accounting that we benefited from in the fourth quarter.

Sally Cunningham: tax accounting that we benefited from in the fourth quarter and the $5.7 million negative impact from the pension plan termination that we recorded in the third I'd also like to highlight that we returned more than 65% of our 2024 net income to shareholders through a combination of share repurchases and dividends.

Sally Cunningham: And the $5 $7 million negative impact from the pension plan termination that we recorded in the third quarter.

Sally Cunningham: I'd also like to highlight that we returned more than 65% of our 2024 net income to shareholders through a combination of share repurchases and dividends.

Sally Cunningham: Now turning to our balance sheet and cash flows. For the year ended December 31st, 2024, net cash provided by operating activities was $65.4 million, compared to $88.6 million for the year ended December 31st, 2024. which benefited from post-pandemic working capital.

Sally Cunningham: Now turning to our balance sheet and cash flows for the year ended December 31, 2024, net cash provided by operating activities was $65 $4 million compared to $88 $6 million for the year ended December 31, 2023, which benefited from post <unk>.

Sally Cunningham: Net working capital improvement.

Sally Cunningham: Networking capital for 2024 provided $14.5 million of cash compared to $49.5 million of cash in 2020. Cash flow from operations performance in 2024 was enhanced by our ongoing working capital. as evidenced by favorable trends in both DSO and DPO metrics. The movement and cash flow from operation reflects these working capital dynamics. with partial offset coming from non-cash adjustments related to equity compensation and the pension settlement charges.

Sally Cunningham: Net working capital for 2024 provided $14 $5 million of cash compared to $49 5 million of cash in 2023.

Sally Cunningham: Yes.

Sally Cunningham: Cash flow from operations performance in 2024 was enhanced by our ongoing working capital initiatives as evidenced by favorable trends in the DSO and <unk> metrics.

Sally Cunningham: The movement in cash flow from operations reflects these working capital dynamics with partial offset coming from noncash adjustments related to equity compensation and the pension settlement charges.

Sally Cunningham: Capital expenditures were $3.2 million in the current year period and $3.4 million in the full year 2020.

Sally Cunningham: Capital expenditures were $3 2 million in the current year period, and $3 $4 million and the full year 2023.

Sally Cunningham: During the 12 months ended December 31, 2024, we allocated cash flow to fund the acquisition of HealthBeacon for $7.4 million, and to return value to shareholders through share repurchases and our quarterly dividend that I mentioned a moment ago. In 2024, we repurchased 668,785 shares, totaling $14.1 million and paid $6.3 million in dividend.

Sally Cunningham: During the 12 months ended December 31, 2024, we allocated cash flow to fund the acquisition of health Beacon for $7 $4 million and to return value to shareholders through share repurchases and our quarterly dividend that I mentioned, a moment ago and.

Sally Cunningham: In 2024, we repurchased 668785 shares.

Sally Cunningham: Totalling one totaling $14 $1 million and paid $6 $3 million in dividends.

Sally Cunningham: We made significant progress strengthening our balance sheet in 2024. On December 31, 2024, our net cash position, or cash and cash equivalents, and highly liquid short term investments, minus our total debt was $600,000. compared to a net debt position of $34.6 million at the end of 2022.

Sally Cunningham: We made significant progress strengthening our balance sheet in 2024.

Sally Cunningham: On December 31, 2024, our net cash position, our cash and cash equivalents and highly liquid short term investments minus our total debt was $600000 compared to a net debt position of $34 6 million at the end of 2023.

Sally Cunningham: In December of 2024, we entered into a new credit agreement to replace our previous credit facility that was set to expire in June of this year. This new facility extends the terms to December of 2029, and replaces our $150 million facility with a $125 million facility combined with an optional $25 million term loan. As of 1231, the company carried $50 million in debt with favorable interest rate swaps that generate interest income. and a leverage ratio of 1.29 at year end 2024 compared to a leverage ratio of 1.69 at year end 2023. We believe that funds available from our $50.6 million of cash on hand, the new facility, and operating cash flows will provide sufficient liquidity to meet our operating needs and commitments.

Sally Cunningham: In December of 2024, we entered into a new credit agreement to replace our previous credit facility that was set to expire in June of this year.

Sally Cunningham: This new facility extends the terms to December of 2029, and replaces our $150 million facility with $125 million facility combined with an optional $25 million term loan.

As of 12 31, the company carried $50 million in debt with favorable interest rate swaps that generate interest income and.

Sally Cunningham: And a leverage ratio of 129.

Sally Cunningham: At the at year in 2024 compared to a leverage ratio of 169 at year end 2023.

We believe that funds available from our $56 million of cash on hand, the new facility and operating cash flows will provide sufficient liquidity to meet our operating needs and commitments.

Sally Cunningham: Turning now to our outlook for 2025. As Scott mentioned, we expect to build upon our momentum from 2024, driven by several initiatives across our multiple lines of business. The small kitchen appliance retail market is expected to grow in the low single-digit range in 2025. We expect to modestly outperform the industry in 2025, with revenue growth approaching the mid-single-digit range. We expect operating profit to increase at a faster rate than revenue, driven by expense leverage on higher revenue with gross profit margins in line with the 2024 record level, along with a sharp decrease in health-speaking SG&A expenses.

Sally Cunningham: Turning turning now to our outlook for 2025 as Scott mentioned, we expect to build upon our momentum from 2024, driven by several initiatives across our multiple lines of business.

Sally Cunningham: The small kitchen appliance retail market is expected to grow in the low single digit range in 2025.

Sally Cunningham: We expect to modestly outperform the industry in 2025 with revenue growth approaching the mid single digit range.

We expect operating profit to increase at a faster rate than revenue driven by expense leverage on higher revenue with gross profit margins in line with the 2024, a record level along with a sharp decrease in health speak and SG&A expenses.

Sally Cunningham: This will be partially offset by a significant step up in planned advertising in fiscal 2025 to support our strategic growth initiative. As Scott said, we have mitigated the impact on approximately 35% of our products. and we are planning to increase this by another 25% to 35% in 2025 as we work towards our goal of mitigating potential tariff impacts on 75% of our products. We expect we'll be able to offset any additional impact from tariffs through select price increases and supplier concessions, and therefore don't anticipate the recent change in tariffs to pressure our profitability in 2025.

Sally Cunningham: This will be partially offset by a significant step up in planned advertising in fiscal 2025 to support our strategic growth initiatives.

Sally Cunningham: As Scott said, we have mitigated the impact on approximately 35% of our products.

Sally Cunningham: And we are planning to to increase this by another 25% to 35% in 2025 as we work towards our goal of mitigating potential tariff impacts on 75% of our products.

Sally Cunningham: We expect we'll be able to offset any additional impact from tariffs through select price increases and supplier concessions and therefore don't anticipate the recent change in tariffs to pressure our profitability in 2025.

Sally Cunningham: Cash flow from operating activities, less cash flow used for investing activities for 2025, is expected to be in the range of $40 to $50 million per year.

Sally Cunningham: Cash flow from operating activities less cash flow used for investing activities for 2025 is expected to be in the range of $40 million to $50 million per year.

Sally Cunningham: This concludes our prepared remarks. We will now turn the line back to the operator for Q&A. Thank you so much.

Sally Cunningham: This concludes our prepared remarks, we will now turn the line back to the operator for Q&A.

Speaker Change: Thank you so much and at this time I would like to remind everyone in order to ask a question press star and the number one on your telephone keypad once again star one.

Operator: And at this time, I would like to remind everyone in order to ask a question, press star and the number one on your telephone keypad. Once again, star one. and we will pause just a moment.

Sally Cunningham: And we will pause just a moment.

Sally Cunningham: Yeah.

Sally Cunningham: Yeah.

Sally Cunningham: Okay.

Operator: Okay, it appears there are no questions. How about going once? and going twice.

Sally Cunningham: Okay. It appears there are no questions how about going once.

Sally Cunningham: And going twice.

Operator: Okay, well, since there are no questions, that will conclude today's call. Thank you all for joining today, and you may now disconnect. Have a great day, everyone.

Sally Cunningham: Okay, well since there are no questions that will conclude today's call. Thank you all for joining today and you may now disconnect have a great day everyone.

Sally Cunningham: [music].