Thank you for standing by. My name is Ian, and I will be your conference operator. Today. At this time, I would like to welcome everyone to the Hamilton Beach Brands Holding Company Q3 2024 Earnings Conference Call. [Operator Instructions]. Thank you. I will now hand things over to Lou Nabhan , Head of Investor Relations. Lou you may begin your conference.

Thank you, Ian. Good morning everyone, and welcome to the third quarter 2024 earnings conference call and webcast for Hamilton Beach Brands Holding Company. Yesterday, after the stock market closed, we filed with the SEC our Form-10Q for the quarter ending September 30, 2024 and we issued our third quarter 2024 earnings release. Both documents are available on our corporate website. Our speakers today are Scott Tidey, 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 risk 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 10-Q, our earnings release and our annual report on Form-10k for the year ended December 31, 2023. 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 will turn the call over to Scott. Thank

Thank you, Lou. Good morning everyone, and thank you for joining us. We are pleased with our third quarter results, and I look forward to discussing our strong performance. Before we get to that. I would like to address our recent leadership changes. I'm excited and deeply honored to be here for my first call as President and CEO of our Company, a role to which I was appointed by our Board of Directors October 1st. This leadership change is a result of a thoughtful long term succession plan. Last month, our former CEO, Greg Trepp, who is with us today, announced his retirement effective year end. To ensure a smooth transition Greg stepped down as CEO and Board Member on September 30, and will continue to support us in an advisory role for the rest of his time with the company. It is my pleasure to recognize and thank Greg for his outstanding leadership over his 28 years with our company, especially the past 15 years as CEO. Under his leadership, he built a fantastic global team and cultivated our good thinking culture, which champions innovation. Together, we have achieved notable successes, including growth in sales and market share for Hamilton Beach and Proctor Silex, a strong presence in the premium and commercial markets, advances in ecommerce, the creation of a global home healthcare solutions business and important advances with our strategy to leverage partnerships and acquisitions. Greg's leadership has positioned us strongly for the future, and we're incredibly grateful for his contributions. And now I'd like to ask Greg to say a few words,

Thank you, Scott. It's truly been a privilege to spend most of my career with a remarkable company, especially in the role of President and CEO. This transition is part of a well-planned leadership succession. Scott was appointed President in February and took on the CEO role in October. Over the past few months, we worked closely to ensure a seamless transition. Scott brings 31 years of expertise with our company. The strategic focus and deep knowledge of our business people and values make him the ideal successor. I have full confidence in Scott, our Senior Management and our global team to carry forward our mission and build upon what we've accomplished together. Hamilton Beach's strengths come from our commitment, our committed team, and good thinking culture that is focused on innovation and customer satisfaction. These qualities make me very optimistic about our company's future. I want to thank our team, the Board of Directors, our customers, suppliers and business partners for their trust and support. It's also been rewarding to engage with our institutional shareholders since we became a public company in 2017. The past several years, Scott has participated in our quarterly earnings calls, in many of the investor conferences that we have attended. I know Scott, Sally and Lou will continue building those relationships. In closing, I congratulate Scott on his well-deserved promotion and wish everyone continued success. Back to you, Scott.

Thank you, Greg, for your kind words and your unwavering support. We all wish you a wonderful retirement. Now I'll turn to our financial and operating performance. I'll provide a high level overview and Sally will cover the details before we open it up for questions. We are pleased with the financial results we have delivered this year. For the first nine months, our revenue grew 5.3% compared to the same period last year. Our gross profit margin expanded by 480 basis points to 25.9% compared to 21.1% last year. Operating profit almost doubled, and net income increased 19.2%. Let me now discuss the third quarter this year compared to the same period last year. For context, let me remind you that in last year's third quarter, we saw a post pandemic normalization of business conditions and trends. For that turnaround, our strong team had managed through an extraordinary operating environment that spanned several quarters. Pandemic driven challenges included historic surge in demand, disruptions across the supply chain and spiking then falling product and container cost. Early last year, we were still working through the remnants of that environment. By the third quarter, however, most suppliers have returned to normal lead times, shipping transit times have returned to normal, and other parts of our business had normalized. As we said previously, compared to the first half of this year. We are now cycling more challenging comparisons. At the same time, in the third quarter, we delivered revenue growth of 2% and our gross profit margin expanded by 190 basis points compared to the same period last year. In fact, our gross profit margin has expanded year over year for five consecutive quarters. In the current quarter, operating profit and net income were impacted by two non-cash items, higher incentive compensation…

Great. Thank you. Scott, good morning, everyone. I will start with our third quarter 2024 results compared to the third quarter of 2023. As you've heard, we are pleased with our third quarter results. We experienced revenue growth and gross profit expansion, even as we are starting to cycle over the more difficult comparisons that started in the third quarter of 2023 however, operating profit and net income faced headwinds from non-cash expenses, including increased equity incentive expense due to stock appreciation and the one time pension plan termination expense that was reclassified from accumulated other comprehensive income. Starting with revenue total revenue in the third quarter was $156.7 million, a 2% increase over last year's third quarter. The increase was driven primarily by a favorable product mix as well as higher volume, partially offset by expected average price decreases. Most of the growth was in the U.S. consumer market, which benefited from the incremental and new placements that Scott discussed. Revenue also increased in our Mexican consumer market, while revenue decreased in our Latin American and Canadian consumer markets. Our global commercial market experienced a decrease in revenue due to soft international markets, especially China, also included in the third quarter was $1.2 million of new revenue from our HealthBeacon acquisition. While the contribution to total revenue is small at this point, it has grown every quarter this year and is expected to grow in 2025. Gross profit totaled $43.9 million compared to $40.1 million gross profit margin expanded to 28% compared to 26.1% in last year's third quarter. The 190 basis points expansion in gross profit margin and the current quarter was due to favorable product mix and lower product cost and every quarter this year, we have delivered above prior year, quarter and above our historical range.…

[Operator Instructions]. Our first question comes from the line of Adam Bradley with AJB Capital.

Hi. Sally and Scott, congrats on another great quarter. I've been a shareholder for several years, and I've just been really pleased with the profitability expansion especially recently. So I wanted to ask, yeah, yeah. I mean, good job, guys and Scott, welcome looking forward to your leadership as a shareholder. So I have some detailed questions about the P&L to help understand and inform the forward looking. If I start at the gross margin level, there has been significant expansion, as you all highlight, and that has been great. The SG&A line especially the last few quarters, has expanded as well. You identified $4.7 million hearing your remarks of the equity compensation in HealthBeacon that explains a good amount of it. If I take that out, we're still seeing like this quarter, for example, about 12% year over year, SG&A growth. So that is not my question. My question though is how correlated is the SG&A expense change to that of gross margin rather than sales? Because, specifically, sales are growing at low to mid-single digit rate. But gross profit is expanding at a very high rate, as is SG&A and what I'm really trying to get to is if gross margins were to begin to normalize back to historic levels, would portions of SG&A also come down, trying to understand the relationship between your SG&A costs and your gross profit line.

I think that's a good question. I think inherently within SG&A you have the ability to constrict right as needed and expand as you make investments, right So certainly, if we started to see constriction in our gross profit margin, then we would, of course take a look at our controllable expenses and right size those as well. I do think you're seeing in our SG&A right now a couple things that are beyond our control with the stock price appreciation, I think you're seeing some known investments that we're making, particularly in the HealthBeacon, right like we knew that this first year was going to be a little bit of drain on operating profit, but kind of permanent increase to SG&A that’s the nature of buying another business. But we feel like that business will be contributing to operating profit in 2025, and I think the rest of what you're seeing in there is just continued investments from the business as we're trying to continue to grow and pursue our strategic initiatives.

Okay, great, thanks. Yes, on the stock price, let's hope that continue as well. Well, I think your compensation, you know that that you can control ultimately in the number of shares that you do issue, but I think to answer my question. So to summarize some of it, some of the expansion that we're seeing in SG&A is the result of expanded profitability and investment in new areas is as well as some -- okay, great. I have a second question. I can ask it now, or I can get back into the queue.

Yeah. Go ahead. Yeah, go ahead and ask it.

Yes. So this gross margin expansion has been really great to see for two reasons, from my investor perspective, one is that just on its face, it's great to see better profitability from what you're doing two over the last five or six quarters, it's been actually the result of higher unit volumes, and your price has actually been a price per unit has actually been coming down for six quarters. So it -- what you all highlight is that it's more mix and volume contributing to gross profit over price. Can you? One question, number one is, how sustainable are the existing gross margins? Like you're hitting 28 -- I mean, every quarter now, it's been higher than previous for a little while now, on a rolling 12 months basis or so. How much of it is sustainable? And can you give a little more color on what is driving it? A little more specifically, is it investment in new areas, new product lines, or versus extensions of older product lines just help us understand its sustainability and what's really driving it. I think it's key to your profitability. So I think we need to know.

Okay, I mean, this is Scott. So I think you brought up a couple of reasons why our gross profits have been improving. It is because of mix, and also just from the cost decreases that we've had as we've gotten back into a more normalized time period, but as we talked about, we've got a couple of strategic initiatives that are favored at higher gross profits, as I indicated, we're really working hard to improve our market share in the premium market. In that space, you're going to find higher margins than you are going to find in the mass markets. We've also improved our profits in the commercial space and as we bring on, while it's still a small amount, as we bring on the Hamilton Beach Health Business we think that those gross margins will be very healthy for us. So overall, we're continuing to work on our mix as we look at how do we want to be growing share in certain markets and so between offering just overall, generally higher priced goods to our retail partners and getting more market share in that and that more premium segment, that's one of the drivers that's been driving our gross profit.

Thanks, and the sustainability of this level..

Yeah. Adam I think we're very focused if you look at the 40 plus new products that we're bringing out our goal is to continue to keep pushing up our gross profits and so our teams here are designing and developing products that meet those Consumer Solutions, though, but at higher gross profits, and we feel like that's a thing that we need to continue to do. We feel like there's space there, and we have a lot of ability to continue to grow and drive more market share.

All right, thank you. Well, great job. Anyone who's looked at the history of the company, it's always been good and stable and is now hitting a new level of profitability. So thanks for answering my questions and great job.

Yeah, thank you, Adam. Appreciate your questions.

There are no further questions at this time. I would like to hand things back over to Scott Tidey for some closing remarks.

Thank you. As you've heard today, we are pursuing multiple avenues to continue to grow revenue, expand margins and deliver strong cash flow. Our company is committed to increasing long term shareholder value. For the year 2024 we expect to deliver a significant increase in operating profit reflecting revenue growth and gross profit margin expansion. We look forward to finishing this year in a strong position. That concludes our report for today. Thank you again for joining our call.