Lifetime Brands, Inc.

Good morning, ladies and gentlemen, and welcome to Lifetime Brand's second quarter 2023 earnings conference call. At this time, I would like to inform all participants that their lines will be in a listen-only mode. After the speaker's remarks, there will be a question-and-answer portion of the call. If you'd 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.

Thank you. Good morning, and thank you for joining Lifetime Brand's second quarter 2023 earnings call. With us today from management are Rob Kay, Chief Executive Officer, and Larry Winokur, 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 securities litigation reform act any such statements are not guaranteed the 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 such statements are based upon information available to the company as of the date hereof and are subject to change for future developments 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. With that introduction, I'd like to turn the call over to Rob Kay. Please go ahead, Rob.

Thank you. Good morning, everyone, and thank you for joining us today. I'm pleased to share that we delivered second quarter results that surpassed analyst estimates, a testament to the strong progress we are making to position the company for growth and improve profitability while we continue to navigate macroeconomic headwinds. As companies across our industry and the broader market feel the ongoing impact of inflationary and recessionary pressures on demand, our prudent balance sheet management, disciplined approach to capital allocation, and careful evaluation of investment opportunities have positioned Lifetime for growth as macroeconomic conditions improve. In the second quarter, we delivered $146.4 million in net sales compared to 151.3 million in net sales in the same period last year. In the 12-month period ending June 30, 2023, we generated adjusted EBITDA of $54.6 million. We're pleased that our strong market share position and focus on execution have allowed us to continue to perform well in comparison to the market and our peers. I'll start with our core US business, which performed in line with our expectations for the quarter. The oversupply issues that retailers across categories faced in 2022 continue to abate a key positive indicator that has begun to translate to upticks in shipment activity. While we expect consumer demand in this market to remain under pressure due to macroeconomic factors, We were encouraged to see continued pickup and order flow throughout the quarter and expect these positive trends in purchasing levels will continue as we move through the balance of the year. Additionally, our continued focus on profitability allowed us to deliver greater than expected gross margin improvement for the quarter. As wholesale unit price declines resulting from normalized supply chain costs are passed on to consumers, we expect to see positive impacts on point of sale. It's important to point out that our results reflect the impact of a large-scale distribution conversion at one of our largest customers, which resulted in decreased orders and in-stock levels. We expect this temporary disruption to be fully restored in the second half of the year. Now, turning to our international business segment. As I've discussed before, we've already realized significant benefits from the restructuring of our Europe-based operations, and we continue to expect that these efforts will result in a substantial improvement in profitability. However, the ongoing recessionary environment in the United Kingdom, which accounts for over three-fourths of our international business, continues to impact consumer demand. While we expect these macroeconomic factors to persist in the short term, we remain focused on solidifying our international positioning with the goal of delivering top-line improvement in 2024. In Asia Pacific, the seamless implementation of our go-to-market strategy in Australia and New Zealand has translated to significant margin improvement compared to last quarter. We are encouraged by this success and are now rolling out an e-commerce driven strategy in our other Asia-Pacific markets. We are already seeing increased orders at better margin levels as a result of our expanded product offerings and believe these trends will continue throughout the second half of the year and into 2024. While challenges in the operating environment remain, we are encouraged by the growth we are seeing in several key areas of our business. We continue to focus on innovating and introducing new products to bolster our market position. In cutlery, we introduced a new Farberware forged knife set that helped Farborough regain the number one position in market share and earn the brand's first placement in Costco USA. In kitchenware, the introduction of Kamenstein ceramic and core products created a new revenue stream with this product line extension, while the introduction of Chicago Metallic everyday bakeware creates an avenue to pursue market share at value-based price points. We recently signed a license for a line of Dolly Parton branded products across several categories. This is a plus one opportunity to sell in existing channels with a strong new brand and also in new channels as it expands our reach to consumers in a channel that we currently do not participate in. Separately, our food service business continues to gain share with Mikasa Hospitality becoming a recognized industry player. we are encouraged by the progress we are making. Consistent with the nature of this market, the new business wins we are achieving in 2023 should drive significant growth in 2024. Additionally, consistent with our strategy of entering adjacencies, we capitalized on our relationship with the retailer Meijer to take over their outdoor product category. which will be a springboard for Lighttime to enter this new adjacency. This opportunistic expansion into a new category through a strong relationship will provide us with an opportunity to expand distribution of this category in 2024. I'd also like to highlight our record-breaking performance at this year's Amazon Prime Day, where we outperformed in almost every category compared to both historical performance and our peer set. We saw a 47.5% increase in revenue versus our prior year Prime Day performance. We've been working closely with Amazon to optimize our advertising spend and drive sales. We are optimistic that our demonstrated momentum will continue in this key channel through the balance of the year. We continue to take active steps to reduce our exposure to the supply chain issues in China through strategic diversification efforts. Through a transitional supply agreement, we are working to ramp up production at the plastics manufacturing facility that we expect to acquire in Mexico later this year. The facility in Mexico represents a key opportunity to enhance sourcing from third-party factories in the region. Continuing on the strategic sourcing initiative, in the next 15 months, we expect to have resourced product supply so that approximately 25% of our source spent on goods will be outside of China. I'd like to briefly touch on the impairment charge of $4.4 million we recorded in the second quarter, which Larry will discuss with you in additional detail. This non-cash charge on our investment in Grupo Basconia represents the write-down to record the investment at its fair value. 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. Primarily, as a result of this charge, we provided revised full-year 2023 financial guidance metrics for net loss and diluted loss per common share. We reaffirmed our 2023 guidance for net sales, income from operation, adjusted income from operations, and adjusted EBITDA. Turning to our balance sheet, we have continued to strengthen our balance sheet through a combination of disciplined cash management and deleveraging. This approach has put us in an increasingly strong position to deploy our capital at the right time to create value for our shareholders. For example, this quarter we prepaid nearly $50 million on our term loan, which resulted in a gain of $2.4 million before fees and expenses. Additionally, this will reduce annual interest expense by approximately $2 million. The gain was recognized in the second quarter of 2023. As we look ahead and as the economic environment improves, we will continue to be thoughtful and opportunistic in our capital allocation approach as we evaluate value-enhancing opportunities to drive growth, including potential M&A. We are confident that we are taking the right steps to position our business for long-term growth. We have a leading portfolio of widely recognized brands with multi-channel growth opportunities, a strong innovation engine, a resilient and efficient business model, and a healthy balance sheet to support our growth initiative. Our ability to outperform in the quarter, despite the challenges facing our industry and the broader market, reflects the progress we have made in the last several years to strengthen our company's foundation and ability to achieve our long-term goals. I am thankful for all of our team members, unrelenting focus on execution, and am excited about the opportunity we see ahead. With that, I'll now turn the call over to Larry.