Hamilton Beach Brands Holding

phone keypad. Once again, star 1. And if you'd like to withdraw your question, simply press star 1 again. Thank you. So without further ado, I would like to turn the call over to Brendan Frey, partner with ICR. Brendan, you have the floor.

Thank you, Greg. Good afternoon, everyone, and welcome to the fourth quarter 2024 earnings conference call and webcast for Hamilton Beach Brands. Earlier today, after the stock market closed, we issued our fourth quarter earnings 2024 Earnings Release, which is available on our corporate website. Our speakers today are Scott Teide, President and CEO, and Sally Cunningham, Senior Vice President, Chief Financial Officer, and Treasurer. 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 or during the Q&A. Additional information regarding these risks and uncertainties is available in our 10Q, 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, 2024. 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. The company will also discuss certain non-GAAP measures. Reconciliation for Regulation G purposes can be found in our earnings release. And now, I'll turn the call over to 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. Importantly, we maintain strong gross margins north of 26% despite a promotionally 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 in gross margin we've taken this year. 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 operating cash flow. which speaks to the underlying 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. 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 of the company to maintain its top line momentum and recent gains we've made in our margin profile. 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. 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 US and in our international markets. In 2024, our U.S. consumer business grew 3.6%, 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. A great example of new product innovation driving our recent performance is the Flex Brew coffee maker. The FlexBrew 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. New products also helped 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 under-penetrated 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 US premium market. Consumers reacted positively to several of our premium product introductions in 2024. Our new milk 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 CHI closed steamer line has been another success story. We leveraged CHI's 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. It's compact, lightweight, and heats up in just 35 seconds, making it the perfect for both home use and travel. We've incorporated CHEE's signature lava technology, which provides exceptional heat conductivity, giving consumers professional-grade wrinkle removal in a convenient, portable package. 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. 2024 also saw us work to increase share in our commercial business. While this segment is still relatively a small portion of our overall revenue, it represents another large and under-penetrated opportunity. 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 in a leading convenience store chain with over 1,000 locations and a global coffee retailer with more than 25,000 stores. Summit Edge high-performance blender delivers speed of service and one-touch convenience, perfect for high-volume commercial environments. Whether blending ASEA bowls, green smoothies, protein shakes, or iced coffee drinks, the Summit Edge creates a smooth, creamy profile every time. Key features include power blend technology, ultra quiet operation with quiet blend technology, one-touch automatic blending, and an intuitive touchpad with optimized programming. 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 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 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. In 2024, we experienced solid growth with many of our major retail partners and commercial customers. Our small consumer appliance brands 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 pure play 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. We also expanded our business with several large restaurant and hospitality chains in 2024. 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 brands. We'll also accelerate our commercial business expansion, focusing on penetrating new channels and expanding our relationship with large restaurants and hospitality chains. 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. 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. 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. 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. With that, I'll turn it over to Sally.