Good morning, ladies and gentlemen, and welcome to Lifetime Brand's Third Quarter 2024 Earnings Conference Call. At this time, I would like to inform all participants that their lines will be in a listen-only mode. [Operator Instructions]. I would now like to introduce your host for today's conference, Rory Rumore. Ms. Rory, you may begin.

Thank you. Good morning, and thank you for joining Lifetime Brand's Third Quarter 2024 earnings call. With us today from management are Rob Kay, our Chief Executive Officer, and Larry Winoker, our 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 our earnings 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 our earnings 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 a comparable financial measure 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. On today's call, I'd like to first briefly touch on our third quarter financial results. Second, discuss the factors that contributed to the reduction in our guidance for full year 2024, the strong performance in our e-commerce channel and progress in our International and Professional Food Services Division, and touch on anticipated M&A. Fourth, provide an update on the supply chain, and lastly, I will touch on the balance sheet. For the third quarter, 2024, we delivered net sales of $183.8 million compared to $191.7 for the same period last year. Sales were largely impacted by softness in the end markets that drove slower volume at point-of-sale and contributed to de-stocking in our core U.S. business, most notably in the mass channel. Specifically with reference to Dollar General reporting a decline in their year-to-date revenues and store traffic, they've made the decision to delay the second phase of the Dolly Parton program, which had originally slated to begin shipping in 2024 and is now planned to be shipped in the first quarter of 2025. With this pushout in shipments, we now anticipate $4 million of our previously forecast $10 million in sales from the Dollar Store to be recognized in the first quarter of 2025. At the time, we reported our second quarter results in early August. We did not have this line of sight and today issued an update to our full-year 2024 outlook to reflect this and other updates in our business. The uncertainties signaled in prior quarters have intensified with relatively weak end market conditions combined with slower restocking that has contributed to that has contributed to weaker than expected shipments. Additionally, while a small overall impact, the overall downturn in the food service market…

Thanks, Rob. As we reported last evening, net income for the third quarter of 2024 was $300,000 or $0.02 per diluted share compared to $4.2 million or $0.20 per diluted share in the third quarter of 2023. Adjusted net income was $4.5 million for the third quarter of 2024 or $0.21 per diluted share compared to $7.7 million or $0.36 per diluted share in 2023. Income from operations was $8.6 million in the third quarter of 2024 versus $13.6 million in the 2023 period. Adjusted income from operations for the third quarter of 2024 was $13.2 million compared to $17.7 million in the 2023 period. And adjusted EBITDA for the trailing 12-month period ended September 30th of 2024 was $53.9 million. Adjusted net income, adjusted income from operations, and adjusted EBITDA are non-GAAP financial measures which are reconciled to our GAAP financial measures in the earnings release. Following comments over the third quarter of 2024 versus 2023, unless stated otherwise. Consolidated sales declined by 4.1% to $183.8 million. U.S. segment sales decreased 5.1% to $170.2 million. As Rob commented, sales were adversely affected by end market softness that drove slower volume at point of sale and contributed to retailers' de-stocking, including delaying programs. Within the segment, the product lines most affected by these factors were tableware, kitchen tools, and hydration. These declines were partially offset by increases per cutlery and home decor products. And while brick and mortar retail demand declined, U.S. e-commerce sales increased from 15.7% to 18.3% of total U.S. sales. International segment sales increased by 10.9%, $1.3 million, 1.1 million in constant U.S. dollars, to $13.6 million. The increase came from UK national and export accounts to continental Europe, in part driven by new placement at large retailers. Gross margin overall remained mostly steady with a slight…

Thank you. We will now be conducting a question and answer session. [Operator Instructions]. Your first question comes from Anthony Lebiedzinski with Sidoti & Company. Please proceed with your question.

Good morning and thank you for taking the question. So I guess we first wanted to drill down on the 3Q sales shortfalls. So maybe if you could separate the impact of the delayed shipments for, I believe mass retail was the biggest sales that you saw the performance, but then look at that versus the Dolly Parton shipments that got delayed. So maybe if you could just kind of cross out those two and I have a couple of other questions as well.

Yes, so the big miss in the quarter, some of the timing is in the mass channel where there was just softness and the orders weren't there. The guidance was driven also because that didn't the dollar shipments of Dolly were not in the third quarter. But there was a fair amount in the fourth quarter, as we said, well over 4 million, which is being pushed at their choice. So it'll ship in the first quarter, but it won't ship in this quarter and that helped drive the change in our guidance.

All right, that's helpful, Rob. And then in terms of the distribution expenses, they were up 17% from last year. I think Larry, you touched on a little bit, but that's a bigger spike than what you guys typically have in a quarter. So maybe if you could just drill down into some more details about that and what are your expectations going forward?

Yes, so when I cited the percentage that they were even with last year, I did exclude two items that won't repeat. One of them is that something we periodically assess is what's called asset or time and obligations. And you look at all your facilities and determine when those -- by the time those leases expired, what kind of restitution of the conditions of those properties you need to pay for. So we periodically assess it. We had a fairly large assessment this quarter that won't occur going forward. The other one is, as I also mentioned, we do have a new warehouse management system. It's not CapEx, it's all licensing. However, we did have some efficiencies in the implementation. It's all completed for one of our facilities, which is down the West Coast, Rialto. That's all done, but there were some efficiencies that I don't expect to repeat because it's running smoothly. And our East Coast facility in New Jersey, where we're now doing the implementation. We have all the learnings of doing the West Coast first, but we don't anticipate anything unusual. Just note that the asset time and obligation is not to get into arcane here, but you put up an asset and a liability and then you depreciate the asset. So in our financials for the quarter, it's depreciation expense. There wasn't any cash that way.

Got you. And just to follow up on that. So, in terms of just the distribution expenses, so roughly a $3 million increase in a year-over-year basis. So how much of that would you say is non-recurring of that increase?

Yes, approximately $2 million of that.

Okay. That's very helpful. Okay. And my last question before I pass it on to others. So as far as the international segments, it's definitely nice to see improved results there. What are you assuming now for this segment? So what's embedded in your new guidance now for the year in terms of your operating income or net income? However, you want to address that, but just wondering what are you factoring into the international segment now? And it sounds like you expect that to improve next year, but any thoughts on that, that'd be helpful.

Yes, we really haven't broken that out, but it's consistent with what we said in the past. So it won't make a profit this year. It will be the performance and the bottom line and top line will improve year-over-year, which is in our guidance for this year. But we'll see the bigger impact next year, which when we release that, we'll discuss.

Got it. Thank you very much for the best of luck.

Thank you.

[Operator Instructions]. Next question comes from Brian McNamara with Canaccord Genuity. Please go ahead.

Good morning. This is Madison Callinan on for Brian. Thanks for taking our questions. First, we're just curious what drives the hockey stick improvement and sales in Q4 with guidance calling for 9% growth at the midpoint? Thanks.

Well, you characterize it as a hockey stick. We just see it as the fourth quarter is strong. We did mention there are some programs that were delayed at the retailer's direction. So we expect that to shift in the fourth quarter, which is [Indiscernible].

Yes. A lot of it is just timing and look in our business. You can have programs that shift one quarter versus the next, right? So for the full year, it's moved out, and one quarter may be different versus the quarter -- a year-over-year versus another quarter, but for the full year, it's moved out and that's historically what you see with our business.

Great. And then secondly, after a few lean years with tough end markets, what will it take to sustainably grow the business again long term? Any color around that? Thanks.

There's so much noise out there. It's an interesting question. So, it's consumer confidence and consumer demand drives our business, like most consumer products. So if you look at the market over the last couple of years, we've maintained or gained market share. The overall market hasn't been growing in the consumer. In the food service, part of our business, it's been a good growth business. We're really just gaining a lot of share. But that market is down this year as inflationary and other, particularly food inflation and the cost of dining has gone up. People haven't been dining as much and therefore the industry has not opened as many stores and has delayed decisions on capital spend, in other words, new dinnerware and glassware and the like. So, but that is currently a 6% growth industry. We expect that in the near term back to those levels. And if you look at Circana data, if you look at NRF and other big organizations, they're expecting pent-up demand to be released in a robust holiday season. We'll see soon enough, right? And -- but if there's increased stimulus, which may happen in the year, that definitely benefits consumer spending as we saw back in the big stimulus in 2021, right? People use that money to spend. So that would be a big benefit for our business. The European marketing, particularly, but for us, we're not as penetrated. So, those markets are soft. There's a lot of macro issues. If the winter ends up being cold, that's going to hurt demand there because energy costs are just so high. But we continue to gain share. So that's why in that environment, you see us growing 11% this quarter. And that should continue to drive our performance internationally because we're just gaining share in a market though that isn't doing well with a growth in that end market, we'll go that much better. So a lot of it is going to be consumer confidence, the general state of the economy and consumer spending.

Thank you very much.

Next question, Christina [Indiscernible] with the D.A. Davidson, please go ahead.

Hi, it's Christina on Linda Bolton Weiser. So a clarifying question, I was wondering like for the $4 million, is there something planned for third quarter or fourth quarter that got delayed to the first quarter of '25? And maybe on the new commercial food product line, like so obviously retailers were kind of like locked in to put in the order. So like, how are the retailers accepting the new commercial food product line based on the conversation that you have recently?

Yes, hi. On the first piece, I think you're asking about Dollar General. So Dollar General excuse me, the shipment of shift of a little over $4 million is really a 4Q to 1Q shift. It will shift. So, but the shift is from Q4 into Q1. And that had a big impact in widely revised guidance. So that's just the timing. And that program is solely at Dollar General. Dollar General had softness in public. So it's actually a good opportunity because our relationship is really strengthening with them. But as a result, they didn't move stuff into score, which they originally were going to do. And they delayed it out a quarter. It is going to shift. The program is doing extraordinary well, is exceeding as they tell us their expectations noticeably. So that program will grow meaningfully in '25, but the delay is shipping. We have the inventory sitting in just here. We will ship that to them already scheduled in Q4. I think the second question had to do with our food service, nothing to do with retail. So, the food service, so in that segment, hotels, restaurants, it's probably the industry's down, right? So in a down time, they're delaying capital spend, which includes buying these sets again, and wearing glasses, and the like. And new store openings, which drive our business, because if you need new tabletop, and for that matter, back of the house, scales and thermometers, timers. So it's just down in the industry is expected to rebound next year. But we're gaining share in there. So a lot of share that we've gained wins because of the delay, they're not shipping, but that'll ship starting in '25 with all these new wins, just because they're going to have to buy stuff. And the other piece we had announced our partnership with a Dutch company to gain a very prestigious line that already has existed and been sold for years, called Royal Leerdam and ONIS, it's the same company, had two lines. And we originally had anticipated that starting to ship in Q4. Operationally, that's going to specifics operation, we're more sophisticated than they are from a logistics and operation, which includes barcoding and other packaging things. And as a result of sort of the systems need to be able to put that in place, it caused a delay in our shipping that product, which we originally hoped and anticipated to ship that product starting in Q4. Now that'll start shipping in Q1.

That concludes today's call. Thank you all for joining. You may now disconnect.

Thank you, everyone.