Good morning, ladies and gentlemen, and welcome to the Lifetime Brands' First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would like to introduce your host for today's conference, Carly King. Ms. King, please go ahead.

Thank you. Good morning, and thank you for joining Lifetime Brands' First Quarter 2024 Earnings Call. With us today from management are Rob Kay, Chief Executive Officer; and Larry Winoker, Chief Financial Officer. Before we begin the call, I'd like to remind you that our remarks this morning may contain forward-looking statements that relate to the future performance of the company. And these statements are intended to qualify for the safe harbor protection from liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance and factors that could influence our results are highlighted in today's press release and other factors are contained in our filings with the Securities and Exchange Commission. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update such statements. Our remarks this morning and in today's press release also contain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Included in such release is a reconciliation of these non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP. With that introduction, I'd like to turn the call over to Rob Kay. Please go ahead, Rob.

Thank you. Good morning, everyone, and thank you for joining us today. I am pleased to report a solid start to fiscal year 2024, delivering first quarter results that were in line with our expectations and came in above the broader market. Our performance this quarter is a direct testament to the work we have done in the last few years to ensure we are well positioned to compete and gain share, notwithstanding market conditions. As we look ahead to the rest of the fiscal year, we are confident in our ability to continue driving operational excellence, advancing our strategic growth initiatives and investing in our business to drive value for our shareholders. We delivered $142.2 million in net sales this quarter, a decrease of 2.2% year-over-year. This slight decrease reflects both economic headwinds and the impact of inventory rationalization efforts among select retailers, which I will elaborate on later in my remarks. It is worth noting that third-party market data, which we track reported a decline of approximately 3.5% in point-of-sale revenues, indicating that Lifetime's top line performance exceeded the broader market across our categories. Despite these macro pressures, we delivered strong bottom line growth driven by gross margin of 40.5% for the quarter, exceeding expectations and surpassing that of our first quarter last year. This was a result of benefits from favorable product mix, new product introduction, and stability in our supply chain. Further, our margin expansion and increased profitability despite challenges in the underlying markets underscores our continued focus on disciplined expense management as we balance investment and growth with delivering financial results. Beginning with our core U.S. business. We delivered solid results in the first quarter and performed well in comparison to the market and our peers. As widely reported for the quarter, end markets across…

Thanks, Rob. As we reported this morning, net loss for the first quarter of 2024 was an improved $6.3 million or $0.29 per diluted share compared to $8.8 million or $0.41 per diluted share in the first quarter of 2023. Adjusted net loss was $3.2 million for the first quarter of 2024 or $0.15 per diluted share as compared to $2.6 million or $0.12 per diluted share in 2023. Income from operations was $1.8 million in the first quarter of '24 as compared to a loss of $1.8 million in the '23 period. And adjusted income from operations for the first quarter of '24 was $5.7 million compared to $3.4 million in the '23 period. Adjusted EBITDA for the trailing 12-month period ended March 31, 2024, was $59.5 million, an increase of $2.2 million from $57.3 million for full year 2023. Adjusted net loss, adjusted income from operations and adjusted EBITDA are non-GAAP financial measures, which are reconciled to our GAAP financial measure in the earnings release. Following comments for the first quarter of 2024 and 2023, unless stated otherwise. Consolidated sales declined by 2.2%. U.S. segment sales decreased by 2.3% to $130.5 million. As Rob commented, the key factor was lower in-stock levels at certain retailers. Within this segment, the decrease occurred in the home solutions and kitchenware categories. Home solutions decline was due to lower hydration products and Taylor bath measurement products. Kitchenware decline was from kitchen tools and barware, partially offset by an increase for cutlery and boards. This segment's decrease was partially offset by an increase in the tableware category due to a new warehouse club program. International segment sales were down 1.6% or $200,000 or $700,000 in constant U.S. dollars to $11.7 million. As Rob commented, this slight decrease was due to the ongoing recessionary…

[Operator Instructions] Our first question comes from Anthony Lebiedzinski from Sidoti & Company.

So first, in regards to your first quarter commentary in the International segment. So it sounds like there was a big drop off there in March. As far as the core U.S. segment were the sales kind of more even by month? Or did you see any substantial variations and just wondering about how the quarter flowed.

Unrelated, but we did see a softer March and a stronger start of the year in the U.S. markets as well. But the U.K. business, while the U.K. market is sluggish, as we talked about, they were beating and having a very strong January and February, but then primarily driven by being shut down by their largest customer, no shipments, had a very bad March and that put them into the slight decline.

Understood. Okay. And then, Rob, in terms of your commentary about the second quarter sales being down, is that mostly because of the Dolly Parton merchandise shifting from April until the sort of third quarter? Or is there anything else driving that?

No, it's really not related to that, Anthony. While we initially expected to ship -- start shipping Dolly in the second quarter, it wasn't substantial. It's just that we're going to ship nothing or maybe $100,000 or we expect it to ship maybe $0.5 million or so. So it is just timing and it's informational. It's -- the reason for decline is just seasonality and how the business rolled in last year versus this year in terms of different programs. So it's just timing of how last year played out versus this year, so the comps are different quarter-to-quarter. And that's why you'll see that drop off and then pick up not related to the Dolly Parton launch.

Okay. And then certainly, it was nice to see the gross margin improving here in the quarter. How sustainable is that improvement do you think going forward?

That's -- that was timing, having to do with how we recognize in inventory, the savings that hit the first quarter. We don't -- that's not going to be maintained for the balance of the year.

Okay. So...

Excuse me, Anthony, you talked about the gross margin, right? The comment about gross margin.

That's correct. Yes. Yes, I was talking about the gross margin.

So it will be -- it should be better because we had this big pickup in this first quarter. So it should be better than last year, but it's not going to be sustained at that level for the remainder of the year.

Year-over-year, they'll be higher, right? And as we talked and we've locked in things but we're not going to see an increasing trend.

Right. Don't expect 40% for the full year.

Okay. That's should clarify that. And then lastly, before I pass it on...

That's reflected in our guidance. And that's reflected in our guidance.

Of course, right. Right. So I guess my last question before I pass it on to others. So you talked about the potential acquisitions. It's -- just wondering how strong is your appetite for that? And then in terms of valuation multiples, what are you seeing out there in the marketplace now?

It's -- our appetite is strong, but as we've done -- as you've seen us done -- do, we'll maintain discipline, right? So there's a lot we could have been announcing to the public for a while now, but we just maintained discipline and we're not willing to do something unless we're confident in it. We have seen valuations being much more attractive than they've been for over a decade, particularly for strategic because financials are less competitive in this market. Cost of debt is higher, and the availability of debt is lower, so they have to put in more equity, therefore, valuations are down for them. And that's helped the whole market and given an edge to strategics. So we are interested -- the availability of product is out there. In many cases, again, an advantage for a strategic is you need people who can add value and not on a stand-alone basis. So we are active. We are looking, but we'll maintain our discipline.

Our next question comes from Brian McNamara from Canaccord Genuity.

I guess my first one, as we look at the guidance applies a pickup of growth on the top line this year, which kind of investors have been waiting for after, I guess, Q2. Like when we look at H2 forward, should we kind of return to more consistent predictive top line growth from your perspective? And kind of how should that look like?

Yes, Brian, as we talked about, there's still not tremendous visibility, and we're not assuming big growth in the end markets and have not factored that into our guidance. If that happens, that's accretive. This is driven by stuff that we have in the pipeline. So new product introduction and new launches and gaining share is what is driving our growth in the second half.

Okay. And then on -- it's probably a broader question, but your stock has traded at about 9,000 shares since the market opened on an earnings day. So like Larry, you've been pretty vocal about your view that the stock is undervalued, but does it make sense to be a public company? I know it's a big question here, but investors can't buy it because [ it does have ] liquidity. So I'm just curious how you guys think about that in terms of getting the value that you work hard to and that you think you deserve?

Yes. We do think there's an intrinsic value gap, and management and the Board will assess different paths to realize that value. But we do recognize that gap that needs to be addressed.

And then my last one is, I guess, what products do you have out in the marketplace right now that have been surprises both pleasant and maybe not so good. And kind of what's your relative hit or miss rate in a typical year in terms of new product launches?

That's hard to answer. We launched so much and in so many different levels, some of it is just what we refer to as lipstick on the pig. We've just taken something that we used to sell in blue, we sell in white now. And there's different reasons why we're launching things. But the -- if you look at beautiful, if you look at totally white space, I should say, we launched Beautiful in multiple categories. It is growing. Its highly successful and grown where we already had major share at Walmart in terms of cutlery but we also launched it in Towles in Walmart, where we are the #1 provider as well. It did not do so well, so we're no longer selling that, right? So you got to hit [indiscernible], right, in that one. We're highly confident in Dolly, which is all incremental. It gets us into a new channel pretty much on pace we don't sell, which is dollar channel. But we're very bullish on the Dolly line based upon the tremendous feedback we've gotten from everyone we speak to and demand of stuff that we're not even selling it. So that doesn't guarantee success, but we think that, again, we're very bullish. We think that, that will work. And there were things that we launched in the last year, which didn't -- they were much smaller, so we didn't really talk to them. Fortunately, our biggest one that we're launching seems to have very good traction.

Next question comes from Linda Weiser from Davidson.

Yes. So I was curious in the market where the consumer is particularly weak, I guess, U.K. especially, are you thinking about making some changes to your merchandising plans, your product mix or your marketing plans, like maybe introducing more lower price point items. I know that your items are relatively low in price point anyway, but just how are you changing your plans? I mean, given sort of the sustaining consumer weakness in some regions.

Yes. Well, using -- starting with the U.K. that you talked about, the business historically was very dependent on independents and specialty, and what they call [ cookstop ]. And what we've done is to reposition what we're selling and where we're selling. So we picked up and we're doing more with Dunelm and Next and the international retailers there. We're doing a similar strategy in Continental Europe picking up [ Etica and Carrefour ] and larger players in the major geographies. So it's really -- the strategy is more shifted to channel that has a price implication in terms of your sale points as well and what you're selling. So we had to have the right product for that. Secondarily is we've been exploiting because we didn't know we have KitchenAid internationally. When we got that, we're now -- we've been selling that and we're now positioning and that's giving us a beachhead because many, particularly retailers and larger retailers are very interested and want the KitchenAid brand. And now that we're getting that in there, we're now selling our complete portfolio. So those are our 2 main prongs that we've implemented, which is different from how we did business in the past.

Okay. And then is -- on Mikasa Hospitality, is there any way of telling us roughly the sales level roughly in 2023? And then what kind of growth rate you're expecting in 2024?

So yes, our foodservice business was in the neighborhood of $20 million of which Mikasa Hospitality was a very small piece of that for 2023. It will grow fivefold in 2024 at a minimum based upon what we believe we've already achieved. That means the Mikasa Hospitality piece. The rest of the business will grow like 5% and that combined will get us, we believe, close to the $30 million that we talked about.

So for $30 million total in 2024?

Yes.

Okay. Great. And then...

Versus $20 million in '23, right, Linda? .

Yes, got you. Yes. And then sorry, I missed this a little bit or I didn't understand. The Dolly Parton, you said there's a possibility of expanding it. Did you say into another retailer in the dollar channel or even beyond the dollar channel? I didn't quite catch that.

Yes. So when we launched Dolly, it's not an exclusive in the dollar channel, but we did -- it allowed us to get into the dollar channel. So we launched it first in the dollar channel with one retailer, the largest player in the dollar channel. We are in conversations to sell it in many other -- too many other customers that we traditionally do business with outside the dollar channel.

Okay. And what would be the timing of that potential expansion? Would it be not until next year 2025 or?

There might be some that ships -- likely 2025. Yes. But there's a chance of some in 2024, but it -- with most likely 2025.

Okay. And then I was curious on the cost side, you mentioned the freight that you had contracted for that to be fairly flattish going in the next year, which is good. What are you seeing more on the commodity side just given that there's been some little increase in oil and things like that. What are you seeing in the rest of the cost base?

We have been very effective in reducing our cost of goods sold, not just in freight, and we don't see inflationary pressures on that. And in this end market environment is kind of a buyer's market and you can translate that into being more aggressive on cost.

As of right now, we don't have any raised hands. I'd now like to hand back over to Rob Kay for final remarks.

Thank you, and thank you for -- to everyone for spending your time and listening on our call, and we look forward to continued dialogue. Have a great day.

Thank you so much for attending today's call. Have a wonderful day. You may now disconnect.