Lifetime Brands, Inc.

Good morning, ladies and gentlemen, and welcome to Lifetime Brands First Quarter 2025 earnings conference call. At this time, I would like to inform all participants that their lines will be in listen-only mode. After the speakers' 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, Jamie Kirchin. Mr. Kirchin,

you may begin. With us today for 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 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 our earnings 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 further developments. Acceptance required by law of the company does not undertake any obligation to update such statements. Our remarks this morning and in our earnings 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.

As we navigate a volatile macro

and political environment, we are continuously evaluating options and consequences that impact most aspects of our business. With that in mind, I will start today's call by discussing our first quarter performance before getting into the current operating environment and lifetime strategic positioning. Sales for the quarter were down slightly year over year, with a more pronounced impact on gross margin due to shifts in customer and product mix. Popline performance was primarily affected by challenges in the mass channel, where we experienced declines in certain product categories. These trends mirror broader industry patterns and were driven by slower retail sales and inventory levels at key mass retailers towards the end of the fourth quarter. Additionally, ordering patterns softened due to ongoing trade concerns, particularly around tariffs. Many retailers pulled back on incentives in response to rising input costs and general uncertainty as a means to prolong inventory levels in the face of potential supply disruptions later in the year. Despite headwinds in the mass channel, we achieved strong gains in e-commerce, the dollar channel and club, driven by new product introductions and good point of sale sell-through. These areas helped offset some of the declines and underscore the resilience of our multi-channel strategy. Uncertainty continues to define the current operating environment. Across the board and within the consumer products industry, companies are bracing for further economic headwinds and a volatile tariff policy. For retailers, this creates unpredictability around pricing, promotions and product planning, resulting in slower purchasing, cautious reordering and extended decision cycles. All of these factors are being addressed by lifetime as we execute and adopt our business model to maximize performance and flexibility in this environment. The first area I would like to comment on related to lifetime's capability in navigating the rapidly changing operating environment driven by the changes in U.S. trade policy and the trade policy where the company does business is that lifetime and its management has a long successful history of navigating to economic and other external shocks and has the infrastructure to succeed in these environments. This includes substantial experience in moving product manufacturing throughout the world and the appropriate quality, supply and logistics organization to continue to implement changes to our manufacturing and sourcing footprint. It is also important to note that the majority of our products that we sell are accessibly priced with a selling price below $20. While we have always maintained strict operational discipline, as mentioned on prior earning calls, the current economic environment calls for an additional response. Accordingly, we've taken an even firmer approach to cost management by tightening controls on variable spending, which we expect to see benefits from in the second half of the year. Further, as previously discussed, lifetime has been moving towards a geographically distributed sourcing and manufacturing model for nearly two years, which is now a linchpin to mitigate the risks from the uncertainty created by changes in U.S. trade policy. We believe this strategy will optimize the flexibility for lifetime to provide efficient and cost-effective products to our end markets as an alternative to a China-dependent supply chain. This includes an expansion of our Mexico maquiladora factory in which we acquired a controlling interest a couple of years ago. Aligned with this broader strategy, we are on track to complete the relocation of the majority or 80% of our manufacturing out of China by the end of 2025 and are ramping up sourcing from alternative countries in Southeast Asia and North America, including Malaysia, Indonesia, Vietnam, Cambodia, India, and Mexico. In executing this strategy, we have focused on our high-volume runners, which are all included in this strategy, leaving smaller production runs and slow-moving items in China where it is not cost-efficient to move this product for the time being. These actions will reduce the current long-term traffic exposure and enhance supply chain flexibility. In fact, similar to most retailers that source direct private label products and nearly all product suppliers in general merchandise categories, we have seized importing from China any products that carry a 145% tariff rate. In conjunction with our retail partners, we will begin shipping some 145% tariff items from China in the end of the second quarter to avoid -of-stock situations on shelves. These items, as well as any items that are subject to increased U.S. tariffs implemented this year, will carry a higher selling price to offset tariff-related costs. We have already agreed on updated pricing with nearly all of our customer base, which reflects the cost of the currently implemented tariffs in place. These price increases begin to go into effect on May 15th. Further, as noted on earlier calls, we took early action to mitigate tariff risk by starting before the election beginning in October of last year to build an import inventory from China ahead of any increase in tariffs. A positive development from the recent implemented rule changes in U.S. trade policy has been the elimination of the de minimis loophole that allowed an unfair advantage to direct import from Chinese factories through primarily Xin and Timu in the e-commerce channel. The escalation of tariffs on Chinese products was not applied to these transactions, creating a meaningful cost disadvantage for U.S.-based companies and companies that were able to pay tariffs against these transactions that allowed for direct sales of products, often of questionable quality, at a much lower price due to having zero dollars of tariff to pay on these products. The elimination of the de minimis loophole has closed this disadvantage, with prices going up on average a couple of hundred percent, as they are now subject to similar tariffs as other products imported from China. Lifetime and other U.S.-based companies can now compete very effectively against these e-commerce platforms and their Chinese sellers. Permanent Interest Segment highlights on certain key initiatives. In food service, Lifetime's continued investment in growing our food service platforms continues to show results, as this business unit demonstrates ongoing traction with revenue growth for the order, notwithstanding a delayed launch of the Onus oil, lyridium, glass product offering, and macro-driven delays of capital projects from many industry participants that has delayed decisions and orders on new tabletop products and curtailed new store openings throughout the industry. We remain optimistic in our plan for this platform in 2025 and believe we can grow revenues considerably compared to prior year. In international, the turnaround of our international operations remains on track. Revenue in the first quarter was flat year over year in a challenging end market, while operating results improved, driven by the actions we have implemented to date. Further, we are progressing rapidly on our Project Concord plan, which will drive meaningful improvement to profitability this year. KitchenAid, our newly introduced Jamie Oliver tabletop line, and the La Cafeteria coffee and tea lines

all

continue

to perform well internationally. We continue

to focus on what we can control. This year, in response to macroeconomic and tariff-related events, we've identified and eliminated over $10 million in annual costs, paused non-essential marketing and advertising, delayed select product launches, which we believe will not produce a positive ROI in this environment, and will focus on optimizing working capital to improve inventory turns and cash preservation. We continue to actively monitor the markets and all inputs, and can reverse and or change these actions in response to changes in the current environment. Additionally, our distribution facility transition to the new -to-suit facility in Maryland remains on track. While this transition carries a short-term financial impact, we are now forecasting lower capital expenditure outlays than previously anticipated and expect to generate significant long-term efficiencies and synergistic opportunities

with this new facility.

More recently, we have been vocal about one of our growth pillars, M&A. While we continue to actively pursue M&A opportunities, you can imagine that today, the criteria for such opportunities is continuing to be fine-tuned. While valuations are becoming increasingly attractive, this comes at the cost of sacrificing predictability. Therefore, our due diligence is now increasingly conservative given the changing environment. We are focused on operating and sustaining our current portfolio first and foremost. To this point, we will continue to keep the market well-informed on all strategic initiatives,

M&A included.

Despite the aforementioned uncertainties, we are well positioned to absorb near-term pressure and are poised to emerge stronger when economic trends become more predictable. In fact, most of our competitors who face the same macroeconomic challenges are much smaller and less favorably capitalized and will face a high burden to mitigate the impacts should the current external-driven economic shocks continue. Our cross-structure is built for flexibility, and our early actions of shifting the geographies from which we source product have significantly reduced exposure to the existing tariff risks. Backed by a solid balance sheet and focused management team, we are operating defensively today while preparing to seize strategic opportunities to separate us from our competitors. Compared to many peers, we believe we are better positioned for both resilience and long-term growth. While the environment is fluid and to position ourselves for the utmost flexibility, we made the decision to not issue formal guidance for the full year 2025. We will evaluate this decision as the environment progresses with each future earning call. With this, we have also decided to pull back from committing to a more formal investor day later this year. Again, while we are confident in our positioning and the perseverance of lifetime, this requires flexibility and navigating the short-term environment may curtail some of our initial long-term planning. I'll now turn the call over to Larry to walk through more details in our financials.

Thanks, Rob. As we reported this morning, net loss for the first quarter of 2025 was $4.2 million or $0.19 for diluted share. As compared to a loss of $6.3 million or $0.29 for diluted share in the first quarter of 2024. Adjusted net loss was $5.3 million for the first quarter of 2025 or $0.25 for diluted share as compared to $3.2 million or $0.15 for diluted share in 2024. Income from operations was $1.1 million in the first quarter of 2025 as compared to $1.8 million in the 2024 period. Adjusted loss from operations for the first quarter of 2025 was $900,000 compared to adjusted income from operations of $5.7 million in the 2024 period. Adjusted EBITDA for the trailing 12-month period ended this March 31, 2025 was $51 million. Adjusted net loss, adjusted loss from operations and adjusted EBITDA non-GAAP financial measures which are reconciled to our GAAP financial measures in the earnings release. Following comments for the first quarter of 2025 and 2024, unless stated otherwise. Consolidated sales declined by .5% to $140.1 million. U.S. segment sales decreased by .5% to $128.5 million. As Rob commented, net sales was primarily affected by the challenges in the mass panel. Within this segment, the major product line decrease for kitchenware and largely offset by increases in tableware and home solution products on spring warehouse clubs, e-commerce and the dollar channel. International segment sales were approximately even with the prior year period. An increase in the Asia Pacific region was offset by a small decrease from UK national accounts. Gross margin decreased to .1% from 40.5%. U.S. gross margin decreased to .2% from 40.8%. The decline was driven by customer and product mix. International gross margin was followed at .3% despite a .6% decrease versus the prior period. In the U.S. segment distribution expense, as a percentage of goods shipped from its warehouses was .9% versus 10.5%. The decrease is due to an increase in employee expenses as a result of lower labor management efficiencies on higher inventory level and planning for the move to our East Coast distribution facility. As well as software expense for the new warehouse management system in our West Coast distribution facility. These increases were partially offset by lower freight out expense. In the international segment distribution as a percentage of goods shipped from warehouses was 25% versus 23.6%. The increase is due to higher warehouse rent, partially offset by lower freight rates. Looking at selling, general and administrative expenses, they decreased by .3% to 31.5 million. U.S. segment expenses decreased by 800,000 to 30 million. As a percentage of net sales, expense decreased .3% from 23.6%. The decrease is driven by lower employee costs including incentive compensation and lower legal expenses. This is partially offset by an increase in provision for doubtful accounts and an increase in amortization related to an indefinite trade name, definite live trade name, which was reclassified to definite live trade name in the fourth quarter of 2024. International SG&A decreased by 500,000 to 3.7 million. As a percentage of net sales, it decreased to .9% and 35.9%. This decrease is due to lower commissions, expense and foreign currency exchange gain versus a loss in the prior year. An allocated corporate income was 2.2 million versus an expense of 4.5 million last year. This is due to a legal settlement gain as well as lower incentive compensation. Interest expense, excluding market to market adjustment for swaps, decreased by 700,000 due to lower average outstanding borrowings and lower interest rates on outstanding debt. Looking at income taxes, for the current quarter, the effective tax rate differs from the federal statutory rate primarily due to foreign losses for which no tax benefit was recognized. For the prior quarter, the rate differed primarily due to equity-based awards where the book expense exceeded the tax deduction and foreign losses for which no tax benefit was recognized. Given the imposition of extremely high tariff rates and uncertainty as to when or if they will be lowered, we're especially focused on liquidity. Our balance sheet continues to be strong. At quarter end, our liquidity was approximately $90 million, which included cash plus availability under our credit facility and receivable purchase agreement. Our adjusted EBITDA to net debt ratio as of the end of March was 3.6 times. We have been through exogenous economic shocks before, namely, the great recession of 2008 and COVID-19, and we carefully and quickly addressed them. In those situations, the length of the events were unknown, so we prepared for the unknown. We are using our past experience to help prepare us again. As Rob commented, to mitigate the impact of continuing high tariff regime until we can complete our resourcing plan, among other actions, we have identified and are eliminating over $10 million of annualized expenses and are focused on optimizing working capital through increasing our inventory terms. This concludes our prepared comments. Operator, please open the line for questions.

Thank you. Well, now we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while

we poll for questions. Our

first question comes from Anthony Leibitzinski with Sudoti & Company. Please go ahead.

Good morning, everyone, and thank you for taking the questions. So first, looking at the top line, is there a way that you guys can provide some additional numbers? I just wanted to get a sense of the magnitude of the sales decline at mass retail and conversely, the sales increase that you saw at an

e-commerce club and the dollar store channel? Yeah, it's, this thing was like in the range of about

$15 million. Okay, yeah, thanks, Larry.

Okay.

And then can you give us an update on Dolly Parton? Did you guys see those shipments shifting from Q4 to Q1 as you previously expected and any additional thoughts on that?

Yes,

it occurred and shipped just as expected. And the program remains very strong. If you actually look at Dollar General's releases, it usually includes a comment on Dolly Parton. So it's very important to them, so they say, and they continue, we continue to work with them on new programs. So we remain very bullish, and there will be year over year growth in Dolly Parton at Dollar General,

as well as

other retailers.

Thanks, Rob. And then, you know, in terms of the price increases that you're planning to do, I believe what you said, May 15th, which is next week. Can you give us any sense of the magnitude of those price increases and any ideas to like what the volume impact will be once you raise the prices? I know there's a lot of uncertainty out there, but any thoughts on that would be appreciated.

So the bulk of the increases are between 6 and 16 percent, and that excludes the 145, which is much higher. It's unknown in terms of the impact. As I mentioned in my remarks, the average ticket of what we sell is rather small. So if it's a $6 item, it may go up to $6.80, $7. Right. So it's not within the realm of the consumer's affordability.

But, you

know,

there's no visibility.

Right. Okay. And then last one for me before I pass it on to others. So, Rob, you also mentioned that the capex for the new D.C. will be lower. Any sort of way to put a number on that as to how to think about capex for this year?

So I can't put the bucket this year versus next year, because, as you know, we're spending between the two years on the capital. I think that a lot of why the numbers coming down is more driven from over promise, right? Or under promise over delivery, I should say. So, you know, we were conservative in our approach to this, but now, as we solidify the actual contractual arrangements and, you know, racking and other machinery, those numbers were sourcing or ordering at a much lower rate than we had talked about and put in our plan. And that's because it's now reality and we had, I think, we're conservative in our approach. It's seven figures, low seven figures impact. We're still working.

Got it. I appreciate the color.

That's

it. Okay.

Got it. All right. Well, thanks a lot and best of luck navigating through this current environment.

Thanks, Anthony.

Thank you. Our next question comes from Brian McNamara with Canaccord Genuity. Please go ahead.

Hey, good morning, guys. Thanks for taking the questions.

I guess to start off, I look, I don't think this is an easy thing to do, but I'm curious what went into the decision to not provide guidance. We've seen other arguably more exposed companies to China kind of give a kind of a best for this. A best guess. And just given the fact that you guys typically provide guidance and Q1 investors kind of have to wait an extra quarter. So, can you walk through kind of the puts and takes there on that? Giving some kind of directional indicators?

Yeah, sure, Brian. And we understand the benefit, you know, quickly from your seat and why we've always given guidance. But, you know, in two things, look, we did look at the rest of the world and people have provided, people have not. I think the main reason is there's lack of visibility. So, you know, if one was to guide in this environment, you know, it's a bit of a swag. And maybe we're a bit more conservative, but, you know, we felt that with a tremendous lack of visibility, who's what's going to happen tomorrow and change and the like. So, it was driven from that perspective. We thought it

best

to

withhold at this point.

And then

secondly, it's great to see your aggressive push to kind of move out of China, but I guess the counterpoint to that would be why hasn't it been done already? And obviously I'm not making it sound like this is easy to do, but that's a question we expect to get from folks.

Yeah, no, absolutely understand. So, yeah, a lot of it has, you know, I mentioned a bunch of geographies were already shipping from them. So a lot of it has, you know, you know, I mentioned the Mexico facility, which, you know, we ramped that up or we acquired that, you know, and we've been ramping it up. And unfortunately, you know, a hit for production, which we are now expanding besides point hit for production just before the tower started getting implemented. So we've been ramping this up. We could have ramped it up quicker if we were going to spend a lot of capital in actually investing in these facilities, but we're not using our capital and using third party. You know, partners to do this. So that slows you down a little bit because obviously they're reluctant to until they wait to see that situation where they had to do it. So I can say that the feedback that we've gotten from our retail customer base is because we've shared the detail and the transition plans. Because if you think we're, you know, we're passionate price increases, but we're also showing, look, this is, you know, where, you know, you're covered by inventory and covered by new stuff on the lower geography coming in. So the feedback we've gotten universally is that we're substantially ahead of the industry in terms of moving product out of China. So we may have raised it in a way that gave you the wrong impression, but we are actively moving and have already shipping from many of these geographies.

Given your kind of relatively low price point,

what do you think the elasticity of a significant price increase would be on demand relative to your history? And this is obviously understanding this is a unique time, but there's a school of thought that suggests that maybe this pushes more demand into, you know, private label and things like that. How would you expect your products to react or your markets to react to significant price increases?

Yeah, historically, you know, there's been, you know, relatively healthy ability for our products to sell similarly in high-rising cost environments. I always use the example of people have heard me, you know, on can openers, which are single biggest skew and people don't exactly, if they need a can opener and it's $6 and now that can openers let's be extreme, say it's $9. They're not going to go and use a, you know, hammer and screwdriver to open up a can. So we've seen historically and again, we're not a startup. We've got a lot of data that there's been, you know, relative little impact in many of our product categories. You know, food service. Well, it's relatively inelastic for any price increases. In other words, they don't really react at all for price increases, but in rising costs environments, people tend to eat more at home. That will help us. But if food service, right? Tends to do worse. People spend less money in restaurants and traveling. But in again, historically, if you look at for economic environments and rising costs environments,

people tend to eat home. That means they need our products.

Great and then finally, I'm just curious.

Look, the stock hasn't performed well. You know, a lot of the stuff out of your control. I'm just curious what your message would be to shareholders or potential shareholders at these levels here. Thank you.

Yeah, look, we strongly believe there's a big intrinsic value gap. As you know, we, you know, insiders, including the board control, you know, about 40% of the company. You know, so we think there's a big intrinsic value gap and, you know, in the right conditions, we will work hard to make sure that gap is realized in the stock class. We think there's a lot of upside, but, you know, short term and, you know, it appears that the segment is not in favor. But the fundamentals are very strong. It's a big value play. Tremendous cash flow generation. So we think it's a very strong story over the long term.

Thanks

very much. Appreciate the color. Thank you, Brian.

Thank you. As there are no further questions, I would now like to hand the conference over to Robert K for closing comments.

Thank you very much. Thank you everyone for listening in on our call and we hope to be in touch shortly with continued updates. Have a good day.

Thank you. That concludes today's call. Thank you all for joining us. You may disconnect your lines now.