Hamilton Beach(HBB) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Results Overview Management Commentary and Strategic Response Facing Q2 2025 challenges from new tariffs and macroeconomic headwinds, the company implemented strategic actions to improve gross margin and mitigate profitability impact - The second quarter faced challenges primarily due to trade disruptions from new tariff measures and macroeconomic headwinds[2] - The company implemented strategic actions, including accelerating manufacturing diversification, selective price increases, and reducing the fixed cost base[2] - Gross margin expanded by 160 basis points through favorable customer mix shifts, including high-margin commercial and health businesses, mitigating sales pressure on profitability[2] Q2 2025 Financial Highlights Q2 2025 saw revenue decline by 18.2% and operating profit worsen, despite a 160 basis point gross margin improvement and increased net debt Q2 2025 Key Financial Data Comparison | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | Change | | :--- | :--- | :--- | :--- | | Revenue | $127.8 | $156.2 | -18.2% | | Gross Margin | 27.5% | 25.9% | +160 basis points | | Operating Profit | $5.9 | $10.0 | -41.0% | | Total Debt | $50.0 | $50.0 | 0% | | Net Debt | $38.7 | $12.8 | +202.3% | Detailed Financial Performance (Q2 2025 vs Q2 2024) Revenue Performance Total revenue declined 18.2% year-over-year, driven by reduced U.S. consumer sales as retailers paused purchases amid inventory assessments and new tariff price increases - Total revenue decreased by $28.5 million, or 18.2%, to $127.8 million[4] - The revenue decline was primarily driven by reduced sales volume in the U.S. consumer business, as some retailers paused purchases in Q2 to assess inventory levels and price increases from new tariffs[4] Gross Profit and Margin Gross profit reached $35.1 million (27.5% of revenue), with gross margin up 160 basis points, driven by favorable U.S. consumer customer mix and higher-margin international and HealthBeacon sales - Gross profit was $35.1 million, representing 27.5% of total revenue, compared to $40.5 million or 25.9% in the prior year period[5] - The increase in gross margin was primarily attributable to a shift in the customer mix within the U.S. consumer business and a greater proportion of higher-margin sales from international commercial business and HealthBeacon during the period[5] Operating Expenses and Profitability SG&A expenses decreased due to lower incentive costs, partially offset by restructuring severance, resulting in a significant year-over-year decline in operating profit - Selling, general, and administrative (SG&A) expenses decreased to $29.1 million from $30.4 million in the prior year period[6] - The decrease in SG&A was primarily driven by lower incentive-related personnel costs, partially offset by one-time severance costs incurred from restructuring actions taken by management to reduce the cost structure[6] - Operating profit decreased to $5.9 million from $10.0 million in the prior year period[6] Net Income and Earnings Per Share Both net income and diluted earnings per share for Q2 2025 were lower than the prior year period Net Income and Earnings Per Share Comparison | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | | :--- | :--- | :--- | | Net Income | $4.5 | $6.0 | | Diluted EPS | $0.33 | $0.42 | Cash Flow and Debt Analysis Operating Cash Flow (Six Months) Operating cash flow for the six months ended June 30, 2025, shifted to a $23.8 million outflow, a sharp decline from prior year's inflow, primarily due to inventory and accounts payable changes from tariffs and slower sales - For the six months ended June 30, 2025, net cash used in operating activities was $23.8 million, a $60.9 million decrease from net cash provided of $37.1 million in the prior year period[8] - The primary reason was a $50.8 million impact from changes in inventory and accounts payable, attributed to increased inventory due to higher tariffs and accelerated purchases in Q1 2025[8] - Slower sales reduced inventory turns, while lower Q2 purchases decreased accounts payable, further impacting cash flow[8] Shareholder Capital Returns The company returned value to shareholders in the second quarter through share repurchases and quarterly dividends - The company repurchased 215,297 shares of Class A common stock for a total of $4.0 million[9] - Dividends of $1.6 million were paid during Q2 2025[9] Net Debt Position As of June 30, 2025, net debt increased to $38.7 million, compared to $12.8 million in the prior year period - As of June 30, 2025, net debt was $38.7 million, compared to $12.8 million as of June 30, 2024[10] - Net debt is defined as total debt less cash and cash equivalents and highly liquid short-term investments[10] Business Outlook Due to increased uncertainty from recently implemented higher U.S. tariffs, particularly on China, the company has decided not to provide specific business outlook guidance - Given the increased uncertainty resulting from recently implemented higher U.S. tariffs, particularly on China, the company deems it prudent to maintain its practice of not providing specific business outlook guidance[11] Company Information About Hamilton Beach Brands Holding Company Hamilton Beach Brands is a leading designer, marketer, and distributor of small appliances, housewares, and commercial products, also providing connected healthcare solutions, with diverse brands and an active expansion into home health via its Health subsidiary - The company is a leading designer, marketer, and distributor of small household appliances, specialty housewares, and commercial products, also providing connected healthcare management devices and software[13] - It owns consumer brands like Hamilton Beach® and Proctor Silex®, commercial brands such as Hamilton Beach Commercial®, and licenses brands including CHI®, Clorox™, and Brita Hub™[13] - The Hamilton Beach Health subsidiary focuses on expanding into the home health and medical markets, having acquired medical technology company HealthBeacon in 2024[13] Forward-Looking Statements This press release contains forward-looking statements, subject to risks like global economic conditions, tariffs, and supply chain issues, which may cause actual results to differ materially; the company disclaims any obligation to revise these statements - Statements in the press release that are not historical facts are 'forward-looking statements,' subject to risks and uncertainties that could cause actual results to differ materially from expectations[14] - Risks and uncertainties include, but are not limited to: uncertain or adverse global economic conditions, tariff impacts, cost changes, supply chain capabilities, changes in consumer purchasing levels, retail market changes, bankruptcy of major customers or suppliers, currency fluctuations, changes in the regulatory environment, product liability, and increased competition[14] - The company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof[14] Conference Call Details The company will host an earnings conference call and webcast on Wednesday, July 30, 2025, at 4:30 PM ET, providing dial-in information and website access - The company will host an earnings conference call and webcast on Wednesday, July 30, 2025, at 4:30 PM ET[12] - Dial-in numbers are 888-350-3452 (toll-free) or 646-960-0369 (international), with conference ID 1809480[12] - The webcast will be available on the company's investor relations website at www.hamiltonbeachbrands.com and will be archived[12] Consolidated Financial Statements Consolidated Statements of Operations This section details the consolidated statements of operations for the three and six months ended June 30, 2025 and 2024, presenting key financial metrics including revenue, costs, gross profit, operating expenses, operating profit, net income, and EPS Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2025 (Thousands USD) | Three Months Ended June 30, 2024 (Thousands USD) | Six Months Ended June 30, 2025 (Thousands USD) | Six Months Ended June 30, 2024 (Thousands USD) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $127,770 | $156,240 | $261,142 | $284,517 | | Cost of Sales | 92,639 | 115,744 | 193,240 | 213,967 | | Gross Profit | 35,131 | 40,496 | 67,902 | 70,550 | | Selling, General & Administrative Expenses | 29,105 | 30,397 | 59,485 | 61,344 | | Operating Profit (Loss) | 5,948 | 9,956 | 8,261 | 9,013 | | Net Income (Loss) | $4,453 | $5,986 | $6,258 | $4,824 | | Basic and Diluted EPS | $0.33 | $0.42 | $0.46 | $0.34 | Consolidated Balance Sheets This section presents the consolidated balance sheets as of June 30, 2025, December 31, 2024, and June 30, 2024, outlining assets, liabilities, and stockholders' equity, with changes in cash and accounts payable Consolidated Balance Sheets (Unaudited) | Metric | June 30, 2025 (Thousands USD) | December 31, 2024 (Thousands USD) | June 30, 2024 (Thousands USD) | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | $11,338 | $45,644 | $37,213 | | Inventory | 160,357 | 124,904 | 130,197 | | Total Assets | $363,804 | $415,067 | $369,896 | | Accounts Payable | $76,275 | $104,161 | $96,452 | | Revolving Credit Facility | 50,000 | 50,000 | — | | Total Liabilities | 199,829 | 249,164 | 224,164 | | Total Stockholders' Equity | 163,975 | 165,903 | 145,732 | Consolidated Statements of Cash Flows This section details the consolidated statements of cash flows for the six months ended June 30, 2025 and 2024, outlining cash flows from operating, investing, and financing activities, noting a shift from net operating cash inflow to outflow Consolidated Statements of Cash Flows (Unaudited) | Activity Type | Six Months Ended June 30, 2025 (Thousands USD) | Six Months Ended June 30, 2024 (Thousands USD) | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | $(23,773) | $37,071 | | Net Cash (Used in) Provided by Investing Activities | $(1,466) | $(7,347) | | Net Cash (Used in) Provided by Financing Activities | $(10,549) | $(7,683) | | Ending Cash, Cash Equivalents, and Restricted Cash Balance | $11,338 | $38,168 | Non-GAAP Financial Measures Reconciliation Net (Cash) Debt Reconciliation This section provides a reconciliation of the non-GAAP financial measure 'Net (Cash) Debt' to the most directly comparable GAAP measure, showing net debt of $38.7 million as of June 30, 2025 - Net (Cash) Debt is a non-GAAP financial measure used by management to assess financial position, defined as total debt less cash and cash equivalents and highly liquid short-term investments[22] Net (Cash) Debt Reconciliation (Millions USD) | Metric | June 30, 2025 (Millions USD) | December 31, 2024 (Millions USD) | June 30, 2024 (Millions USD) | | :--- | :--- | :--- | :--- | | Total Debt | $50.0 | $50.0 | $50.0 | | Less: Cash and Cash Equivalents | $(11.3) | $(45.6) | $(37.2) | | Less: Highly Liquid Short-Term Investments | — | $(5.0) | — | | Net (Cash) Debt | $38.7 | $(0.6) | $12.8 |