Core Viewpoint - Hamilton Beach Brands Holding Company (HBB) has demonstrated strong financial performance in Q4 2024, with significant stock gains and a solid outlook for 2025, driven by revenue growth, improved gross margins, and strategic market expansions [1][17]. Revenue & Earnings Performance - HBB reported quarterly earnings per diluted share of $1.75, a 25% increase from $1.40 in Q4 2023 [2]. - Revenues for Q4 2024 reached $213.5 million, reflecting a 3.3% year-over-year increase from $206.7 million, attributed to higher volume and a favorable product mix [2]. - The gross margin for the quarter declined by 70 basis points to 26.1% from 26.8% in the prior-year quarter, but for the full year, it expanded by 300 basis points to 26%, marking a record high since HBB became a public entity in 2017 [3]. Profitability Metrics - Operating profit for Q4 declined 5.7% to $23.6 million from $25 million in the prior-year period, while net income rose 22.6% to $24 million from $19.6 million, primarily due to a foreign tax benefit [4]. - Operating cash flow for the year was $65.4 million, down from $88.6 million in 2023, with working capital contributing $14.5 million compared to $49.5 million in the previous year [5]. Expenses and Debt Management - SG&A expenses increased to $32.1 million in Q4 from $30.2 million in Q4 2023, driven by HealthBeacon acquisition costs [6]. - At the end of 2024, HBB reported a net cash position of $0.6 million, a significant improvement from a net debt of $34.6 million at the end of 2023 [7]. Management Insights - The CEO highlighted the achievement of financial targets despite a competitive market, attributing success to expansion into underserved markets and innovation [8]. - HBB gained market share in the U.S. and international markets, particularly in Mexico, where it became the third-largest small appliance brand [9]. Market Performance Factors - Revenue growth was supported by higher volumes in North America, particularly in the U.S. consumer market, while the Global Commercial segment faced slight declines [10]. - The February 2024 acquisition of HealthBeacon contributed $1.7 million to Q4 revenues and $4.3 million for the year [10]. Future Outlook - HBB expects the small kitchen appliance retail market to grow in the low-single-digit range in 2025, with the company anticipating mid-single-digit revenue growth [12]. - Operating profit is expected to rise faster than revenues, benefiting from operating leverage and a decrease in HealthBeacon-related SG&A expenses [13]. - The company aims to mitigate tariff impacts on 75% of its products by the end of 2025 through price increases and supplier concessions [14]. Strategic Developments - HBB is expanding into the healthcare sector through the integration of HealthBeacon, focusing on scaling its remote therapeutic monitoring system [15]. - The company has diversified its sourcing strategy to reduce reliance on China, mitigating sourcing risk for 35% of its business by the end of 2024, with plans to extend this to 75% by the end of 2025 [16].

Financial Data and Key Metrics Changes - Total revenue in Q4 2024 was $213.5 million, a 3.3% increase compared to Q4 2023, driven by a favorable product mix and higher volume, partially offset by average price decreases and foreign currency impacts [35] - Gross profit was $55.8 million in Q4 2024, compared to $55.3 million in the same period last year, with a gross profit margin of 26.1%, down from 26.8% [36][37] - For the full year 2024, net revenue increased 4.6% to $654.7 million, gross margin increased by 300 basis points to 26%, and operating profit increased 23.1% to $43.2 million [40][41] Business Line Data and Key Metrics Changes - The U.S. consumer business grew 3.6% in 2024, outpacing the overall market, while the Mexico and Latin America business saw even greater growth [14] - The HealthBeacon acquisition contributed $1.7 million in revenue during Q4 2024 [35] - The commercial business segment saw significant growth, highlighted by a 50% increase in sales of the Summit Edge blender [22] Market Data and Key Metrics Changes - The North American consumer markets delivered solid growth, particularly in the U.S., while international revenue experienced declines [35] - The small kitchen appliance retail market is expected to grow in the low single-digit range in 2025, with the company expecting to modestly outperform this growth [49] Company Strategy and Development Direction - The company is focused on six strategic initiatives aimed at long-term growth, including core growth, premium market share, global commercial leadership, health segment acceleration, digital transformation, and leveraging partnerships [12] - Plans for 2025 include expanding premium product offerings and increasing marketing investments to support growth initiatives [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in entering 2025 with solid momentum and a robust pipeline of new products, particularly in high-growth categories like specialty coffee and air fryers [28] - The company has taken proactive steps to mitigate tariff impacts, achieving a 35% mitigation by year-end 2024 and aiming for an additional 25% to 35% in 2025 [31][50] Other Important Information - The company returned over 65% of its 2024 net income to shareholders through share repurchases and dividends [42] - The net cash position at year-end 2024 was $600,000, a significant improvement from a net debt position of $34.6 million at the end of 2023 [46] Q&A Session Summary Question: What are the expectations for revenue growth in 2025? - The company expects revenue growth approaching the mid-single-digit range, modestly outperforming the industry [49] Question: How is the company addressing tariff impacts? - The company has mitigated 35% of its products against tariffs and plans to increase this to 75% in 2025 through price increases and supplier concessions [50]

Revenue and Profitability - Revenue for 2024 was $654.7 million, a 4.6% increase from $625.6 million in 2023, primarily driven by increased unit volume and a favorable product mix [140]. - Gross profit margin improved to 26.0% in 2024 from 23.0% in 2023, attributed to lower product and transportation costs [141]. - Net income increased by 21.9% to $30.8 million in 2024, compared to $25.2 million in 2023, with an effective tax rate dropping to 7.8% from 20.4% [140][146]. Expenses - Selling, general and administrative expenses rose by $18.3 million to $126.7 million, largely due to HealthBeacon expenses and increased employee-related costs [143]. Cash Flow and Liquidity - Cash and cash equivalents increased to $45.6 million in 2024 from $15.4 million in 2023, indicating improved liquidity [148]. - Net cash provided by operating activities was $65.4 million in 2024, down from $88.6 million in 2023, reflecting a normalization post-pandemic [154]. Debt and Financing - Interest expense decreased significantly by 79.6% to $0.6 million due to lower average borrowings and interest rates [144]. - The HBB Facility was amended to extend the term to December 2029, with a reduced credit facility of $125 million and an optional $25 million term loan [157]. - As of December 31, 2024, the excess availability under the HBB Facility was $57.3 million, with outstanding borrowings of $50.0 million [158]. - As of December 31, 2024, the weighted average interest rate applicable to the HBB Facility was 2.50% [160]. - The HBB Facility requires a fee of 0.20% per annum on the unused commitment [160]. - Total contractual cash obligations amount to $354,514,000, with $249,329,000 due in 2025 [165]. - A 0.25% increase in the Base Rate would increase estimated total annual interest payments on the HBB Facility by approximately $600,000 [165]. - HBB does not expect to make voluntary repayments under the HBB Facility in the next twelve months [163]. - HBB maintains compliance with all applicable financial covenants in the HBB Facility as of December 31, 2024 [162]. Financial Instruments - The fair value of interest rate swap agreements was a receivable of $4.0 million as of December 31, 2024 [174]. - A hypothetical 10% relative decrease in interest rates would decrease the fair value of interest rate swap agreements by $200,000 [174]. - The fair value of foreign currency exchange contracts was a net receivable of $800,000 as of December 31, 2024 [177]. - Assuming a hypothetical 10% weakening of the U.S. dollar, the fair value of foreign currency-sensitive financial instruments would decrease by $1.2 million [177]. Acquisition Impact - The acquisition of HealthBeacon contributed $4.3 million in revenue for 2024, adding a new revenue stream [140].

Revenue and Growth - Revenue for 2024 increased by 4.6% to $654.7 million compared to $625.6 million[3] - Fourth quarter revenue rose by 3.3% to $213.5 million compared to $206.7 million[3] - The acquisition of HealthBeacon contributed $4.3 million in revenue for the full year 2024[9] - The company expects revenue growth in 2025 to approach the mid-single digit range[17] Profitability - Full year gross margin expanded by 300 basis points to 26.0% compared to 23.0%[10] - Operating profit for the full year increased by 23.1% to $43.2 million compared to $35.1 million[12] - Net income for the full year was $30.8 million, or $2.20 per diluted share, compared to $25.2 million, or $1.80 per diluted share[13] - Net income for 2024 was $30,759,000, up from $25,242,000 in 2023, reflecting a year-over-year increase of 21.5%[27] Cash Flow and Liquidity - Cash flow from operations for 2024 was $65.4 million, down from $88.6 million in 2023[14] - Cash and cash equivalents rose significantly to $45,644,000 in 2024, compared to $15,370,000 in 2023, marking an increase of 197.5%[27] - Net cash provided by operating activities was $65,415,000 in 2024, compared to $88,636,000 in 2023, a decrease of 26.1%[27] - The company reported a net (cash) debt of $(0.6) million in 2024, down from $34.6 million in 2023, indicating a strong cash position[28] Expenses and Liabilities - SG&A expenses for the full year increased to $126.7 million, driven by HealthBeacon expenses and higher employee-related costs[11] - Total liabilities increased to $249,164,000 in 2024 from $237,435,000 in 2023, a rise of 4.0%[25] - Total debt at year-end 2024 was $50.0 million, with a net cash position of $0.6 million[15] Assets and Equity - Total assets increased to $415,067,000 in 2024 from $384,702,000 in 2023, representing a growth of 7.5%[25] - Stockholders' equity grew to $165,903,000 in 2024, up from $147,267,000 in 2023, indicating an increase of 12.7%[25] Other Financial Activities - The company made an acquisition in 2024, resulting in a cash outflow of $7,412,000[27] - Cash dividends paid increased slightly to $6,294,000 in 2024 from $6,082,000 in 2023, reflecting a growth of 3.5%[27] - Trade receivables decreased to $117,068,000 in 2024 from $135,434,000 in 2023, a decline of 13.5%[25]

Group 1 - Hamilton Beach Brands Holding Company will release its 2024 fourth quarter and full year financial results on February 26, 2025, after market close [1] - A conference call to discuss the results will be held on the same day at 4:30 p.m. Eastern Time, with a toll-free number provided for participants [1] - The conference call will be available via live webcast on the company's website, with an archive accessible later [1] Group 2 - Hamilton Beach Brands is a leading designer, marketer, and distributor of small electric household appliances and commercial products [2] - The company owns several consumer brands, including Hamilton Beach®, Proctor Silex®, and Hamilton Beach Professional®, among others [2] - In February 2024, Hamilton Beach Health acquired HealthBeacon, a medical technology firm focused on connected devices, expanding its presence in the home health market [2]

Company Participation - Hamilton Beach Brands Holding Company will participate in the 27th ICR Investor Conference from January 13-15, 2025, in Orlando, Florida [1] - The presentation is scheduled for January 13, 2025, at 9:00 a.m. Eastern Time and will be available via webcast [2] Company Overview - Hamilton Beach Brands Holding Company is a leading designer, marketer, and distributor of a variety of branded small electric household and specialty housewares appliances, as well as commercial products for restaurants, fast food chains, bars, and hotels [3] - The company owns several consumer brands, including Hamilton Beach®, Proctor Silex®, Hamilton Beach Professional®, Weston®, and TrueAir®, and commercial brands such as Hamilton Beach Commercial® and Proctor Silex Commercial® [3] - The company has licensing agreements for CHI® premium garment care products, Clorox™ True HEPA air purifiers, and Brita Hub™ countertop electric water filtration appliances [3] - Hamilton Beach Brands has exclusive multiyear agreements to design, sell, market, and distribute Bartesian® cocktail makers and Numilk® plant-based milk makers [3] - The Hamilton Beach Health subsidiary focuses on expanding the company's participation in the home health market, having acquired HealthBeacon, a medical technology firm specializing in connected devices, in 2024 [3]

Company Overview - Hamilton Beach Brands Holding Company has increased its Board of Directors from 11 to 13 members, appointing April L. Lane and Bela S. Mehta as new independent directors [1][2]. New Board Members - April L. Lane has extensive experience in e-commerce and consumer products, having held leadership roles at Thrive Market, Hearst Corporation, and Amazon, and has a background in retail strategy from Boston Consulting Group [2][3]. - Bela S. Mehta is a seasoned private equity partner and has been Managing Partner at CITG Capital Partners since 2004, with previous roles including President and Board Chairman of Little Switzerland, Inc. [3]. Company Products and Market Position - Hamilton Beach Brands is a leading designer, marketer, and distributor of small electric household appliances and commercial products, with owned consumer brands including Hamilton Beach®, Proctor Silex®, and Hamilton Beach Professional® [4]. - The company has exclusive agreements to design and distribute premium products such as Bartesian® cocktail machines and Numilk® non-dairy milk appliances, and is expanding into the home medical market through its subsidiary Hamilton Beach Health® [4].

Company Overview - Hamilton Beach Brands Holding Company (NYSE: HBB) has been established since 1910 and is recognized as a popular brand in the small home appliances sector, offering products such as blenders, mixers, toasters, and slow cookers [1] Research Principles - Grassroots Trading focuses on providing objective, unbiased, and balanced research, emphasizing solid data without emotional influences or preferences for specific companies [1] - The research targets small- to mid-cap companies, presenting compelling investment opportunities that are often overlooked, while also identifying potential opportunities in large- and mega-cap companies [1]

Core Insights - Hamilton Beach Brands Holding Company (HBB) faced challenges in Q3 2024 due to increased operating expenses and a one-time pension termination charge, but achieved revenue growth driven by strong consumer demand and the acquisition of HealthBeacon [1][3][4] Q3 Results - Quarterly earnings per diluted share were 14 cents, down 81% from 74 cents in Q3 2023, primarily due to higher operating expenses and significant non-cash pension termination expenses [3] - Total quarterly revenues increased by 2% year over year to $156.7 million from $153.6 million, with notable growth in the U.S. and Mexican markets, while revenues in Latin America and Canada declined [4] Profitability Metrics - Gross profit rose by 9.6% to $43.9 million in Q3 2024 from $40.1 million in the prior year, with gross margin expanding by 190 basis points to 28% due to a favorable product mix and lower production costs [5] - Operating profit decreased by 26% to $10.6 million in Q3 2024 from $14.4 million in Q3 2023, attributed to increased SG&A expenses and HealthBeacon's integration costs [6] Costs & Cash Flow - Cost of sales slightly decreased to $112.8 million from $113.5 million in Q3 2023, contributing to gross margin expansion [8] - SG&A expenses rose to $33.3 million in Q3 2024 from $25.6 million, driven by higher employee-related costs and HealthBeacon's integration [9] - Operating cash flow totaled $35.2 million in Q3 2024, down from $68.7 million the previous year, reflecting a normalized post-pandemic working capital environment [10] Liquidity & Capital Allocation - The company ended the quarter with $22.6 million in cash and cash equivalents, up from $1.6 million a year earlier, and net debt decreased to $22.5 million from $49.7 million [13] - Enhanced liquidity allowed the company to fund growth initiatives and return value to shareholders through $4.7 million in dividends and $9.3 million in share repurchases [13] Management Guidance - HBB expects a slight year-over-year revenue increase in 2024, with significant growth in operating profit anticipated due to gross margin expansion [14] - The company is focusing on six initiatives to drive revenue growth, improve margins, and sustain strong cash flow, including boosting sales in North America and integrating HealthBeacon [14] Other Developments - The acquisition of HealthBeacon in February 2024 contributed $1.2 million in revenues in Q3, with expectations for it to contribute to operating profit starting in 2025 [15] - Strategic initiatives include expanding in the premium small appliance market and accelerating digital transformation for long-term growth [15]

Financial Data and Key Metrics - Revenue for the first nine months grew by 5.3% compared to the same period last year [9] - Gross profit margin expanded by 480 basis points to 25.9% compared to 21.1% last year [9] - Operating profit almost doubled, and net income increased by 19.2% [9] - Q3 2024 revenue grew by 2% compared to Q3 2023, with gross profit margin expanding by 190 basis points [10] - Operating profit and net income were impacted by non-cash items, including higher incentive compensation expense and a one-time termination charge [11] - Net income for Q3 2024 was $1.9 million or $0.14 per diluted share, compared to $10.3 million or $0.74 per diluted share in Q3 2023 [28] Business Line Performance - The company launched over 40 new platforms across various high-demand categories, including coffee blending, ovens, grills, slow cookers, and more [12] - Hamilton Beach and Proctor Silex brands saw strong performance in North America, with new product placements in key categories like coffee and blending [14] - The premium market, representing 40% of the industry, saw growth through brands like Weston and licensed partnerships, with strong sales in garment care products [16] - The global commercial market is a multi-billion dollar opportunity, with investments in higher-margin products for food service, beverage operations, and hotel amenities [19] - Hamilton Beach Health, focusing on home healthcare management, is growing with a subscription-based revenue model and is expected to contribute to operating profit in 2025 [21][22] Market Performance - U.S. consumer market revenue increased due to new product placements, while Latin American and Canadian markets saw declines [26] - Global commercial market revenue decreased due to soft international markets, particularly in China [26] - HealthBeacon contributed $1.2 million in revenue in Q3 2024, with expectations for growth in 2025 [26] Strategic Initiatives and Industry Competition - The company is focused on expanding sales of innovative, value-added products that command premium prices and improve margins [12] - Strategic initiatives include gaining market share in the premium market, leading in the global commercial market, and accelerating growth in Hamilton Beach Health [16][19][21] - The company is leveraging partnerships and acquisitions to expand its reach in the global commercial market [19] - Investments in advanced technologies and new product categories are driving growth in both consumer and commercial markets [20] Management Commentary on Operating Environment and Future Outlook - The company is cycling more challenging comparisons in Q3 2024 but remains optimistic about future growth [10] - Management reaffirmed the full-year 2024 outlook, expecting modest revenue growth and significant operating profit expansion [11][32] - The company anticipates solid holiday sales despite restrained consumer spending, driven by a broad product line with value to luxury price points [23] - HealthBeacon is expected to contribute to operating profit in 2025, with growth plans including new patient additions and collaborations [22] Other Important Information - The company terminated its over-funded U.S. pension plan, resulting in a one-time non-cash charge of $7.6 million but freeing up $13 million in surplus assets for future use [11][28] - Net cash provided by operating activities for the first nine months of 2024 was $35.2 million, reflecting normalized post-pandemic working capital [29] - The company paid $4.7 million in dividends and repurchased shares totaling $9.3 million year-to-date [30] Q&A Session Summary Question: SG&A Expense Correlation with Gross Margin - SG&A expenses increased due to higher employee-related costs, including equity incentive compensation and HealthBeacon integration expenses [35] - Management indicated that SG&A expenses can be adjusted based on gross profit margin performance, with ongoing investments in growth initiatives [36] Question: Sustainability of Gross Margin Expansion - Gross margin expansion is driven by favorable product mix, cost decreases, and strategic initiatives in premium and commercial markets [40] - The company is focused on sustaining higher gross margins through new product launches and market share growth in higher-margin segments [42] Question: Gross Margin Drivers and Sustainability - Gross margin improvements are attributed to product mix, cost management, and strategic focus on premium and commercial markets [40] - The company expects to maintain or expand gross margins through continued innovation and market share gains [42]