Hamilton Beach Brands Holding

Good morning and thank you for standing by. Welcome to the Hamilton Beach Brands Holdings first quarter 2021 earnings conference call. At this time, all participant lines are in listen-only mode. After the speaker's presentation, we will have a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone keypad. Please be advised today's conference is being recorded. If you require operator assistance, please press star 0. It's now my pleasure to hand to the conference over to Head of Investor Relations, Luann J. Navhan. Luann?

Thank you, Holly. Good morning, everyone. Welcome to our first quarter 2021 earnings call and webcast. Yesterday after the market closed, we issued our first quarter 2021 earnings release and filed a 10-Q with the SEC. Copies of both are available on our websites. Our speakers today are Greg Tripp, President and Chief Executive Officer, and Michelle Moser, Senior Vice President and Chief Financial Officer. Greg and Michelle will discuss our first quarter results and our outlook. Also participating in the Q&A will be Scott Tidy, Senior Vice President, Consumer Sales and Marketing. Our presentation today contains forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in either the prepared remarks or during the Q&A. Additional information regarding these risks and uncertainties is available in our earnings release and our 10-Q, as well as our annual report on Form 10-K for the year ended December 31, 2020. the company disclaims any obligation to update these forward-looking statements, which may not be updated at all until our next quarterly conference call, if at all. And now I'll turn the call over to Greg.

Thank you, Luann. Good morning, everyone. Thank you for joining us. I will begin with our strong first quarter results. The momentum we experienced in the fourth quarter of 2020 has continued into 2021. Total revenue in the first quarter increased 23.5%. In our core North American consumer market, revenue increased significantly. The growth was driven by strong demand in our U.S., Canadian, and Latin American markets. In our global commercial market, while revenue decreased compared to 2020, the gap to last year closed significantly compared to the gap to prior year we experienced throughout most of 2020. While trends vary by geographic market, the food service and hospitality markets are currently rebounding from last year's pandemic-driven declines. As the food service and hospitality industries continue to recover in 2021, we expect results for this market to improve significantly compared to the prior year. In the e-commerce channel, we have been well positioned to benefit from consumers demonstrating an increased preference for purchasing online during the pandemic. Our well-known brands in the wide range of categories we participate in enable us to benefit from the e-commerce demand that is occurring across the small appliance industry. We were an early leader in the e-commerce channel, and we continue to increase our investments in online sales capabilities. In the first quarter, our e-commerce sales increased 59% and accounted for 35% of total revenue. Revenue from our premium products grew 46% in the first quarter, The Bartesian cocktail machine, our newest entrant in the premium category, has been very well received in the market and was a major contributor to the growth. We also experienced strong sales for our Wolf Gourmet, Westin, and Hamilton Beach professional brands. Gross margin increased 50 basis points in the first quarter. Operating profit, net income, and earnings per share all increased significantly compared to the first quarter of 2020. As a reminder, kitchen collection is a discontinued operation. Its net losses and negative cash flow no longer have an impact on our company. We continue to execute on our strategic initiatives that are designed to deliver long-term profitable growth. Last year, we conducted a detailed review of our progress with our initiatives. As a result, we are continuing to focus on certain initiatives, such as increasing our investment in the e-commerce channel and in the premium and commercial markets. We are expanding our focus to include the large and fast-growing home health and wellness market. In emerging markets, we are pivoting from a company-managed model to a licensing model and reallocating resources to accelerate growth in our heritage North American market. Let me provide some details for each initiative. First, in our core North American market, we compete effectively in the U.S., Canada, Mexico, and Latin America markets. We have been an industry leader in North America for more than 100 years. In the first quarter, our Hamilton Beach brand remained number one in the U.S. in both the brick and mortar and e-commerce channels based on units sold and held a sizable lead over the other players in the marketplace. Hamilton Beach was a top three brand in 25 categories and gained share in 22. We are also a leading brand in Canada and Mexico and throughout Central America. We intend to maintain and grow our leading market position. Our strong portfolio of consumer preferred brands and products has broad channel category and price point coverage. Our brand and product offerings range from value to luxury and cover more than 50 categories. This is a key competitive advantage for us. We continue to focus on strengthening our owned brands as well as pursue new brands through licensing and acquisitions. Another key competitive advantage is that we have a proven track record as an innovator in our industry. Year after year, we introduce new on-trend and innovative products that consumers want. Our success is the result of highly engaged and dedicated team members leveraging consumer insight and continuously evolving our processes and capabilities to generate consumer preferred solutions. Last year, we introduced 76 new product platforms, Plans are in place to launch approximately 130 more over the next two years. Even with most employees working remotely during the pandemic, our new product development process is working well. These accomplishments are playing an important role in our ability to benefit from the broad, small appliance demand across the cooking and beverage categories. I will touch on just a few of our new platforms. First, we have expanded our successful FlexBrew coffee maker platform with several additions. Our original top-selling FlexBrew allows consumers to brew a full pot of coffee or a single cup using their own grounds or a K-cup type pod. Many consumers want to be able to use Nespresso capsules as well. Our newest addition is the FlexBrew Universal, which is compatible with grounds, a K-cup type pod, or Nespresso capsules. or an espresso capsule all in one machine. In the industry's number one category, coffee, we are also introducing new craft cold brew and pour-over machines. Two of the most popular small kitchen appliances are slow cookers and air fryers. We are excited to introduce a new slow cooker with an air fryer lid. Consumers can air fry and slow cook in the same appliance, providing important versatility. The vacuum sealer category is a large and important market. Our Westin acquisition got us into this category. However, we saw very little innovation, and we knew that vacuum sealers were not well designed to seal liquid foods. We developed a vacuum sealer that makes it easy and also provides the first integrated heat stamp date feature that can be placed on a bag, another innovative solution. Our hand mixtures have been the number one brand for a long time. One annoying pain point of hand mixers is the process to clean the beaters. We just introduced a hand mixer that features easy clean beaters and provides a superior mixing performance. Finally, we are repositioning our ProctorSolex brand as Simply Better to meet consumers' needs for basic, durable, and quality appliances. ProctorSolex products have been around for more than 100 years and can be found in tens of millions of homes across North America. Our new line incorporates an intuitive design with superior performance. Four products have launched so far this year, and we have many more that will follow this year and next. One new Proctosolix product we have just introduced is our Sound Shield Coffee Grinder, which is designed to reduce grinding noise by 50%. Our second initiative is to expand our e-commerce leadership as industry online sales continue to grow. Hamilton Beach remains the number one brand in the U.S. e-commerce channel based on units. In the first quarter, all nine of our brands had star ratings of 4.2 or better, and five of our brands were 4.5 or higher. We expect the increased online shopping trend to continue, even as the pandemic wanes, as more people are now accustomed to its convenience. We plan to continue to drive e-commerce growth across all markets, brands, and categories. We are supporting growth in the e-commerce channel by further expanding our e-commerce team, adding investments in digital marketing programs, expanding our direct-to-consumer distribution operation, and by increasing our participation with both pure play and omnichannel customers. We are taking these steps throughout North America as e-commerce growth accelerates in our core markets. Our third initiative is to increase our presence in the premium products marketplace. Revenue from our premium products increased 12% in 2020 and accounted for 11% of total revenue. Growth accelerated in the first quarter to a 46% growth rate. We believe this is an exciting market, and we expect to further grow our participation. I've already mentioned our new Bartesian cocktail dispenser, which we market through a multiyear agreement. Bartesian is the first of its kind to use flavor capsules to create a premier mixed drink at home. In its first full year, Bartesian received a very strong consumer response. We expect to double our sales this year and launch the next generation of machines for both the retail and commercial markets. The partition system includes an extensive line of flavors, which continues to be expanded. There are flavors that go with all the base spirits, flavors for traditional cocktails, and flavors for exotic cocktails. The flavors are offered in individual or convenient variety packs, and monthly subscriptions are available. The Western line continues to grow. We have recently launched several products in some key categories that align with how consumers are storing, cooking, and preparing foods. In our full line of Wolf Gourmet countertop appliances, our entire line is selling extremely well, in particular our ovens, coffee makers, and toasters. In 2021, we are introducing a beautifully designed true temperature electric kettle, complete with a signature red knob. We expect this product will be well received in the U.S. and in international markets. For our Qi Garment Care line, we continue to gain new distribution both in Canada and the U.S. Since we introduced this line in 2017, Qi has become the number two iron brand in the over $40 category with a 40% share. In 2020, the Garment Care category declined as many consumers worked from home. However, in 2021, the category is rebounding. We continue to build out our Hamilton Beach Professional line, which leverages our commercial expertise for home cooks, We've upgraded our existing ovens and toasters. We have introduced a stand mixer, food processor with a spiralizer, coffee maker, and juice extractor. Our distribution and revenue are growing. We plan to continue to expand our presence in the premium market with a robust new product development and by pursuing partnerships and licensing agreements. A big focus for this year is to increase investment in new opportunities in the fast-growing, multibillion-dollar home health and wellness market. Two examples of this include expanding our air purification offerings and entering the water filtration category. We recently launched our first entry in the water filtration market. Our new electric Hamilton Beach AquaFusion appliance filters water and allows for the use of flavor capsules when desired. Demand for air purifiers is very strong for use in homes and businesses. It is a big category in both appliances and replacement filter sales. We've been a participant in the market for more than 20 years, and we are working to leverage our experience into new growth opportunities. We expect to soon announce plans for new offerings that should launch later this year and next. Our fifth initiative focuses on growth in the global commercial market. To enhance our leadership position in this market, we continue to invest in new commercial products and expand our offerings across the food service kitchen. We were also investing in digital marketing and e-commerce, and we continue to strengthen our partnerships with regional and global chains. We are optimistic about the current trajectory of the rebound in the market. We initially expected the market to fully return to pre-pandemic levels sometime next year. However, order patterns are strong as businesses reopen globally. We expect significant revenue and profit growth in 2021 based on order patterns and customer input. Historically, Our global commercial market has delivered operating margins that are much higher than our retail business. In summary, our many competitive strengths have enabled us to capitalize on the strong consumer demand for small kitchen appliances. These include the value of our brands and products, our strong supply chain management, investments in a great talent pool, and continuing to execute on our strategic initiatives. Our team has worked extremely hard and performed exceedingly well in the face of truly extraordinary circumstances all last year and into this new year. I cannot be prouder of our people as they have kept themselves and others safe and healthy and kept the business moving forward on very strong footing. I thank our employees for their commitment and perseverance. I will now turn the call over to Michelle, who will review our financial results for the first quarter and discuss our outlook.