Hamilton Beach(HBB) - 2024 Q1 - Quarterly Results

Executive Summary & Highlights Overview of Q1 2024 performance, highlighting flat revenue, margin expansion, reduced loss, and debt reduction First Quarter 2024 Highlights Q1 2024 highlights include flat revenue, expanded gross profit margin, reduced operating loss, and significant net debt reduction | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change | | :------------------------- | :----------------- | :----------------- | :----- | | Revenue | $128.3 | $128.3 | Flat | | Gross profit | $30.1 | $20.9 | +$9.2 | | Gross profit % of revenue | 23.4% | 16.3% | +710 bps | | Operating profit (loss) | $(0.9) | $(5.1) | +$4.2 | | Cash flow from operating activities | $19.7 | $34.9 | -$15.2 | | Total debt | $50.0 | $79.3 | -$29.3 | | Net debt | $23.7 | $77.1 | -$53.4 | - The Company's Hamilton Beach Health subsidiary completed the acquisition of HealthBeacon PLC, a medical technology company and strategic partner of the Company since 2021[3] - The Company affirmed its full year 2024 outlook of a modest increase in total revenue and a moderate increase in operating profit based on gross profit margin expansion and sees upside potential if consumer spending and retail sales remain strong[3] Financial Performance Analysis Analysis of Q1 2024 financial results, detailing revenue, gross profit, operating expenses, and cash flow First Quarter 2024 Results Overview Total revenue flat at $128.3 million, driven by unit volume and mix, offsetting price declines, with mixed regional performance - Total revenue of $128.3 million was flat compared to the prior year period, benefiting from an 8% increase in unit volume and a favorable product mix, offset by decreased selling prices[4] - Revenue increases in the Mexican and Latin American markets were offset by decreases in the U.S. and Canadian markets, with a slight increase in the Global Commercial market[4] - The acquisition of HealthBeacon on February 2, 2024, added a new revenue stream that was not material in the current quarter[4] Detailed Income Statement Analysis Gross profit rose to $30.1 million with 710 bps margin expansion, while SG&A increased, narrowing operating and net losses | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change | | :---------------------------------- | :----------------- | :----------------- | :----- | | Gross profit | $30.1 | $20.9 | +$9.2 | | Gross profit margin | 23.4% | 16.3% | +710 bps | | Selling, general and administrative expenses | $30.9 | $25.9 | +$5.0 | | Operating loss | $(0.9) | $(5.1) | +$4.2 | | Interest expense, net | $0.2 | $1.3 | -$1.1 | | Net loss | $(1.2) | $(4.8) | +$3.6 | | Diluted EPS | $(0.08) | $(0.34) | +$0.26 | - Gross profit margin expanded by 710 basis points primarily due to lower product costs and a favorable product mix, partially offset by a $0.7 million non-cash lease impairment[5] - SG&A increase was approximately half due to HealthBeacon's expenses and $1.0 million in non-recurring transaction costs, and half due to increased employee-related costs[6] Balance Sheet and Cash Flow Analysis Operating cash flow decreased to $19.7 million due to incentive timing; net debt significantly reduced to $23.7 million | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change | | :---------------------------------- | :----------------- | :----------------- | :----- | | Net cash provided by operating activities | $19.7 | $34.9 | -$15.2 | | Net working capital provided | $33.5 | $39.9 | -$6.4 | | Net debt (March 31) | $23.7 | $77.1 | -$53.4 | | Cash dividends paid | $1.5 | $1.5 | Flat | - The decrease in operating cash flow was primarily due to the payment of incentive compensation during Q1 2024, which was paid in Q2 2023 in the prior year[9] - The Company allocated its strong cash flow primarily to reduce net debt and return value to shareholders through the quarterly dividend[10] Business Outlook & Strategic Initiatives Outlines full-year 2024 financial outlook and details six strategic initiatives for long-term growth and margin expansion Full Year 2024 Outlook Reaffirmed 2024 outlook projects modest revenue growth and moderate operating profit increase, driven by margin expansion - The Company expects a modest increase in full year 2024 revenue compared to full year 2023[11] - The Company expects operating profit for the full year 2024 to increase moderately compared to the full year 2023 based on an expansion of gross profit margin[11] - The Company sees upside potential to its current outlook depending on the continued strength of consumer spending and retail orders, despite the retail marketplace for small kitchen appliances expected to be modestly below 2023[11] Strategic Initiatives Six strategic initiatives aim to drive revenue growth, expand margins, and generate strong cash flow, focusing on North American market - Progress with the Company's six strategic initiatives is expected to drive revenue growth, expand margins, and generate strong cash flow over time[12] - The initiatives are focused on increasing sales of innovative, higher priced, higher margin products in the Company's North American market[12] Drive Core Growth Boosts Hamilton Beach and Proctor Silex brands in North America through innovation, placements, and digital marketing - Focuses on driving growth of Hamilton Beach and Proctor Silex brands in North America, based on quality, durability, and innovation[14] - Hamilton Beach is the 1 small kitchen appliance brand in the U.S. based on units sold, with new products supported by digital, social media, and influencer marketing[14] Gain Share in the Premium Market Expands premium market presence via owned brands, licensing, and exclusive distribution deals for high-end products - Aims to increase participation in the premium market through owned brands (Hamilton Beach Professional, Weston) and licensed brands (Wolf Gourmet, CHI, Clorox True HEPA, Brita Hub)[14] - Has exclusive multiyear agreements to design, sell, market, and distribute Bartesian cocktail makers and Numilk plant-based milk makers[14] Accelerate Growth of Hamilton Beach Health Targets home health market via HealthBeacon acquisition, offering connected devices, with 2025 profit contribution expected - Aims to increase participation in the large and fast-growing home health and wellness market, leveraging the Hamilton Beach Health brand created in 2021[14] - Acquired HealthBeacon PLC in February 2024, which develops digitally connected devices like the Smart Sharps Bin™ for managing chronic conditions with a subscription-based revenue model[14] - Hamilton Beach Health is expected to have an operating loss in 2024 due to investments and start-up phase, but is expected to contribute to operating profit in 2025, with growth plans including adding new patients and customers[14] Lead in the Global Commercial Market Maintains leadership in commercial appliances globally, focusing on differentiated products, new categories, and e-commerce - Leading provider of commercial small appliances to the foodservice and hospitality industries worldwide, driven by the Hamilton Beach brand's reputation[14] - Develops products for competitive advantage in blending/mixing and expansion into new categories, with over 50% of revenue from outside the U.S.[14] - Focuses on building strength in e-commerce, which is becoming increasingly important in the commercial market[14] Accelerate Digital Transformation Enhances e-commerce capabilities through investments, retail collaboration, digital marketing, and direct-to-consumer shipping - Focuses on investments to gain share in the e-commerce market for consumer and commercial products, leveraging a well-developed e-commerce capability[14] - Collaborates with omnichannel and online-only retail customers and invests in robust digital marketing (online content, SEO, advertising, social media) to increase awareness and sell-through[14] - U.S. distribution center provides capability to ship small packages directly to consumers in partnership with retail customers[14] Leverage Partnerships and Acquisitions Actively pursues strategic businesses, trademark licensing, alliances, and acquisitions to drive growth across all markets - Focused on identifying and securing businesses with a strategic fit to the Company's portfolio[15] - Actively engaged in the pursuit of additional trademark licensing agreements, strategic alliances, and acquisitions to drive growth in all markets[15] Company Information & Disclosures Details conference call, company overview, and cautionary statements regarding forward-looking information Conference Call Details Earnings conference call and webcast scheduled for Wednesday, May 8, 2024, at 9:30 a.m. Eastern time - Earnings conference call and webcast scheduled for Wednesday, May 8, 2024, at 9:30 a.m. Eastern time[16] - Access via dialing 888-350-3452 (toll free) or International 647-362-9199, Conference ID: 1809480, or live webcast on www.hamiltonbeachbrands.com[16](index=16&type=chunk) About Hamilton Beach Brands Holding Company Leading designer and distributor of small electric household, commercial, and healthcare appliances, including owned and licensed brands - Leading designer, marketer, and distributor of brand name small electric household and specialty housewares appliances, commercial products, and connected devices and software for healthcare management[17] - Owned consumer brands include Hamilton Beach, Proctor Silex, Hamilton Beach Professional, Weston, and TrueAir; owned commercial brands include Hamilton Beach Commercial and Proctor Silex Commercial[17] - Licenses brands like Wolf Gourmet, CHI, Clorox True HEPA, and Brita Hub, and has exclusive agreements for Bartesian and Numilk[17] - Hamilton Beach Health subsidiary focuses on home health and medical markets, having acquired HealthBeacon in February 2024[17] Forward-Looking Statements Cautionary statement on forward-looking statements, highlighting risks and uncertainties that could alter actual results - Statements are 'forward-looking statements' subject to risks and uncertainties that could cause actual results to differ materially[18] - Readers are cautioned not to place undue reliance on these statements, and the Company undertakes no obligation to publicly revise them[18] - Risks include global economic conditions, supply chain, consumer spending, retail markets, costs, tariffs, litigation, new product acceptance, competition, and regulatory changes[18] Financial Statements Presents unaudited consolidated statements of operations, balance sheets, cash flows, and net debt reconciliation Consolidated Statements of Operations Unaudited consolidated statements of operations for Q1 2024 and 2023, detailing revenue, costs, and net income (loss) | Metric | THREE MONTHS ENDED MARCH 31, 2024 (In thousands) | THREE MONTHS ENDED MARCH 31, 2023 (In thousands) | | :---------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Revenue | $128,277 | $128,252 | | Cost of sales | 98,223 | 107,342 | | Gross profit | 30,054 | 20,910 | | Selling, general and administrative expenses | 30,947 | 25,919 | | Amortization of intangible assets | 50 | 50 | | Operating profit (loss) | (943) | (5,059) | | Interest expense, net | 156 | 1,269 | | Other expense (income), net | 173 | 16 | | Income (loss) before income taxes | (1,272) | (6,344) | | Income tax expense (benefit) | (110) | (1,567) | | Net income (loss) | $(1,162) | $(4,777) | | Basic and diluted earnings (loss) per share | $(0.08) | $(0.34) | | Basic weighted average shares outstanding | 14,162 | 14,073 | | Diluted weighted average shares outstanding | 14,162 | 14,073 | Consolidated Balance Sheets Unaudited consolidated balance sheets as of March 31, 2024, Dec 31, 2023, and March 31, 2023, presenting assets and liabilities | Metric | MARCH 31, 2024 (In thousands) | DECEMBER 31, 2023 (In thousands) | MARCH 31, 2023 (In thousands) | | :---------------------------------- | :------------------------------ | :------------------------------- | :------------------------------ | | Assets | | | | | Cash and cash equivalents | $26,279 | $15,370 | $2,218 | | Total current assets | 262,291 | 286,815 | 235,688 | | Total assets | $368,950 | $384,702 | $336,607 | | Liabilities and stockholders' equity | | | | | Total current liabilities | 126,194 | 139,588 | 88,266 | | Revolving credit agreements | 50,000 | 50,000 | 79,333 | | Total liabilities | 223,543 | 237,435 | 218,178 | | Total stockholders' equity | 145,407 | 147,267 | 118,429 | | Total liabilities and stockholders' equity | $368,950 | $384,702 | $336,607 | Consolidated Statements of Cash Flows Unaudited consolidated statements of cash flows for Q1 2024 and 2023, detailing operating, investing, and financing activities | Metric | THREE MONTHS ENDED MARCH 31, 2024 (In thousands) | THREE MONTHS ENDED MARCH 31, 2023 (In thousands) | | :-------------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash provided by (used for) operating activities | $19,701 | $34,874 | | Net cash provided by (used for) investing activities | $(6,749) | $(614) | | Net cash provided by (used for) financing activities | $(2,085) | $(33,027) | | Increase (decrease) in cash, cash equivalents and restricted cash for the period | 10,865 | 1,290 | | Balance at the end of the period | $27,244 | $3,195 | Reconciliation of Non-GAAP Financial Measures (Net Debt) Reconciliation of Net Debt, a non-GAAP measure, to total debt, used by management to evaluate financial position - Net debt is a non-GAAP financial measure defined as total debt less cash and cash equivalents, used by management to evaluate financial position[27] | Metric | MARCH 31, 2024 (In millions) | MARCH 31, 2023 (In millions) | | :--------- | :--------------------------- | :--------------------------- | | Total debt | $50.0 | $79.3 | | Less: cash | $(26.3) | $(2.2) | | Net debt | $23.7 | $77.1 |