Hamilton Beach Brands Holding

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. 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 first quarter 2025 earnings conference call and webcast for Hamilton Beach Brand. Earlier today, after the stock market closed, we issued our first quarter 2025 earnings release, which is available on our corporate website. Our speakers for today are Scott Teide, President and CEO, and Sally Cudahan, Senior Vice President, Chief Financial Officer, and Treasurer. Our presentation today includes forward-looking statements. These statements are subject to risk and uncertainty 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 10-Q, our earnings release, and our annual report on Form 10-K for the year ended December 31st, 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 I'll now turn the call over to Scott. Scott?

Thank you, Brendan, and good afternoon, everyone. Thank you for joining us today. The year got off to a good start with first quarter sales and operating profit both showing solid improvement despite increasing macroeconomic headwinds. We entered 2025 with good momentum following a successful holiday season and we were able to maintain our positive trajectory over the first three months. Our top line performance was led by our North America consumer business, driven by demand for our mass market brands. Increased penetration from higher margin businesses, such as premium and healthcare, helped fuel another healthy gain in gross margins year over year, which along with lower operating costs, resulted in a $3.2 million improvement in operating profits. We are pleased with our overall first quarter results. As we exited March, we were on track to achieve the full year guidance we provided on our Q4 call in late February, even as the U.S. imposed 20% tariffs on all Chinese imports. With the reciprocal tariffs levied against all trade partners in April and the increase in China tariffs to 145%, visibility into near-term trends has become much more challenging. We are taking actions to mitigate the impact of higher tariffs, which Sally and I will speak to later in the call, but these will take time to flow through our supply chain and income statement. While expect the next few quarters to be difficult for the industry, we are confident in our ability to navigate these headwinds and emerge with our leading market position intact. In the meantime, we continue to execute against our 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. I'll now take a few minutes to highlight some of the recent drivers behind the advancements of these strategies, starting with the drivers of core brand growth in the first quarter. Hamilton Beach brand sales were up modestly compared to the first quarter of 2024 as we take advantage of positive eating and entertaining at home trends. Our success was driven largely by the growth of our U.S. consumer and Latin America businesses. We were also pleased to see continued market share gain of the Hamilton Beach brand in Mexico this quarter. In the U.S., we continue to make progress expanding our reach and expect to benefit from key big box store placement wins in the back half of the year, which should help drive further penetration of our core business in 2020. Turning to our premium business, our powerful portfolio of premium owned and licensed small appliance brands collectively delivered mid-single-digit growth in Q1, driven largely by exceptional growth in both our new milk and Qi brand products, as consumers continue to react positively to our new products introduced over the past year. New milk plant-based milk makers continue to gain traction among health-conscious consumers who value creating fresh, preservative-free alternatives on demand, aligning perfectly with current trends towards healthier and more sustainable options. We also saw continued success with our Chi Iron in the first quarter, highlighted by a successful partnership with one of the largest club stores in North America. These performances were partially offset by the planned wind down of our licensing agreement with Wolf Gourmet. While this will be a temporary drag on results, we are excited about the launch of Lotus, our new owned premium brand in the back half of this year. Lotus will be the premium small kitchen appliance brand for home cooks with big culinary ambition. At launch, the brand will introduce seven new Lotus professional products, including the Perfectionist air fry and convection oven, the Top Drip coffee maker and ground scale, and the Four Slice Precision Toaster. This full range will position us to take share in the nearly $4 billion total addressable premium market. The response from specialty retailers to this new line of sleek, innovative small appliances has been very positive so far. Looking ahead, we plan to expand offerings under LOTUS in 2026 with three new introductions under the signature line. Turning now to our commercial business, along with the strong demand for our signature products like the Summit Edge Blender, we continue to evaluate new opportunities for potential partnerships in the global commercial market. To this end, we signed a new agreement with Sunkist to develop and market Sunkist branded commercial juicers and sectionizers used in leading restaurants, schools, and a large restaurant chain throughout the U.S. As we look to leverage this new opportunity, we're excited about the potential future partnership with a whole new customer base. And lastly, regarding our newest business segment, Hamilton Beach Health, We were pleased with the segment's first quarter performance, which marked its third consecutive quarter of increasing patient subscriptions. Since acquiring HealthBeacon early last year, we've been developing healthcare management tools, including remote therapeutic monitoring systems. As part of our goal to grow our patient subscription base by over 50% this year, we're excited to launch with our newest specialty pharma partner, Optum Health, later this quarter. As we look forward, we remain excited about this high margin business and the untapped potential that lies ahead. Across each of our positions, we are focused on growing through our existing distribution, while also selectively expanding our physical reach and growing our digital presence through our digital transformation efforts. This has allowed us to capitalize on the consumer shift to online shopping, with roughly 40% of the U.S. consumer sales now coming via e-commerce. I'm pleased to report that we delivered mid single digit e-commerce growth in the first quarter with gains across leading e-commerce retailers, our brick and mortar partner digital platforms, and our branded websites. Following a solid first quarter, trends have slowed in April as our retail customers and consumers digest the tariff increases and weigh the potential impacts from ongoing negotiations. As I said earlier, we are taking actions to mitigate the impact to our cost. First, we are implementing a round of price increases in Q2 to address the first round of IEPPA tariffs. We enjoy strong relationships with our retail partners and are maintaining open dialogue as we navigate global tariff implications together. Second, we have taken proactive sourcing actions. including a pull forward inventory purchases from suppliers in Q1 to minimize tariff impact. We have also recently certified our main distribution center as a foreign trade zone to help manage cash flow and tariff impacts. Lastly, we are accelerating our sourcing diversification, prioritizing the movement of product manufacturing based on volume and profitability. Historically, 25% of our sales have originated outside of the U.S., and are not subject to recent tariff actions. For the remaining 75% of sales that are US-based, we have already transitioned approximately 15% of our manufacturing out of China and expect to have two-thirds of our US sales coming from outside of China by the end of 2025, with the remainder to be moved in the first half of next year. We are confident that these actions will positively benefit our margin profile in 2026. With that, Turn it over to Sally.