Good morning, ladies and gentlemen, and welcome to Lifetime Brands Fourth 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. After the speakers' remarks, there will be a question and answer portion of the call. If you would like to ask a question during this time, please press star one on your telephone keypad. I would now like to introduce your host for today's conference, Rory Rumore. Ms. Rumore, you may begin.

Thank you. Good morning, and thank you for joining Lifetime Brands' fourth 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 would 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 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. We are pleased with our strong fourth quarter performance contributing to a solid report for the full year 2024. We delivered mid-single-digit sales growth in the fourth and expanded our gross margin by 130 basis points. Our fourth quarter net sales increased 6% to $215 million as compared to $203 million in the same period last year. Importantly, the positive performance in sales and gross margin demonstrates our team's strategic approach to retain and improve margin during the seasonal period that this year strongly favored promotion, designating Lifetime as a competitive performer within the sector. Margin strength was led by a significant improvement in the gross margin of our international business. As indicated by third-party data drawn from the consumer retail sector, and Lifetime's internal data analysis, which concluded that the first two months of the first quarter signaled soft consumer demand, which could quickly reverse in December driven by our e-commerce business. The holiday season revealed the consumer that flocked to the e-commerce channel where they could receive delivery of products in 24 to 48 hours. This bolstered our online sales to 24% of total sales in the fourth quarter and north of 20% for the full year 2024. While online sales undoubtedly led our growth in the fourth quarter, we also recognized sales growth and consistent strength in the club channel, a core pillar of our US business. The strength of sales contribution by these channels are signs of Lifetime's success in growing market share in the fourth quarter. Let me drill down to the specific categories and products that spurred e-commerce sales during the quarter. Our cutlery, tableware categories, and home care products outperformed year and internal forecasts and drove market share growth in the…

Thanks, Rob. As we report this morning, net income for the fourth quarter of 2024 was $8.9 million or $0.41 per diluted share versus $2.7 million or $0.13 per diluted share in the fourth quarter of 2023. Adjusted net income was $12 million for the fourth quarter of 2024, $0.55 per diluted share compared to $6.3 million or $0.29 per diluted share in 2023. Income from operations was $15.5 million in the fourth quarter of 2024 as compared to $15.7 million in the 2023 period. Adjusted income from operations for the fourth quarter of 2024 was $20.2 million compared to $19.4 million in the 2023 period. And adjusted EBITDA for the full year 2024 was $55.4 million. Adjusted net income, adjusted income from operations, and adjusted EBITDA are non-GAAP measures, which are reconciled to our GAAP financial measures in the earnings release. Following comments are for the fourth quarter of 2024, and 2023 unless stated otherwise. Consolidated sales increased by 6% to $215.2 million. US segment sales increased 5.8% to $196 million. As Rob commented, seasonal consumer demand accelerated in December. Fourth quarter sales growth was driven by continued execution of our online sales strategy, leading to additional market share gain in the e-commerce channel. Both product line sales increased notably cutlery and home decor. Was partially offset by kitchen tools products. International segment sales increased by 7.2% or $1.3 million and $800,000 in constant US dollars to $19.2 million. This increase came from e-commerce and UK nationals, partially offset by a decrease for UK independence. Gross margin increased to 37.7% from 36.4%. In the US segment, gross margin increased to 37.7% from 37.2%. Improvement was primarily due to favorable product mix in the tableware category. For international, gross margin increased to 38.5% from 27.2%, driven by customer and product…

Now be conducting a question and answer session. Thank you. Our first question is from Anthony Lebiedzinski with Sidoti and Company. Please proceed with your question.

Good morning, and thank you for taking the questions. So certainly great to see the better than expected sales in the fourth quarter. With sales accelerating in December. I know you talked about momentum in the e-commerce channel. Somewhat offset by some lower sales in the mass channel. So first, can you give us some maybe more detail about the mass channel softness that you saw? And then also as far as e-commerce, whether you've seen continued momentum from that in the first quarter so far in early 2025?

Morning, Anthony. So yeah, we saw in a couple you know, we sell across all different channels, and we saw different performance in different channels. But we saw that the consumer were shopping later because they can get more delivery, and we've had success all throughout the year in terms of growing our online business. And that continued, and we do see that continuing. Again, differs month by month as we talked about. The first two months of the fourth quarter actually is slower than we thought. And slower than I think a lot of the industry prognosticators had said. And the fourth quarter real sorry. The third month, December, really came in strong and made it a good seasonal. Hornets. Mass, we as a company, lost a little share on the KitchenAid side. And that hurt our performance in the channel for the year. We're looking to rebound and I think that's a one-time movement. In terms of that loss. And sometimes, look, we lose, sometimes we win. Unfortunately, over the last five years, we've won a lot more than the loss, and we continue to try to make that an ongoing trend. That answer your question, Anthony?

Yes. Yes. Yeah. Thanks for that. Okay. And then you know, with respect to the tariffs, can you give us an update on your exposure to China and where do you see that finishing up this year in 2025?

Yeah. I mean, it's very fluid. Right? The whole tariff situation remains fluid, and we have to react. You know, we have continued to move to various geographies with the thought process among other things that we didn't want exposure in just one particular jug. So we're moving in many different places. Throughout the world. Look, we'd like to move to United States, but, you know, we're not prepared to sell a can opener for over $20 and so at this point not feasible. In terms of production in China today, you know, still the majority of what we produce. And we're looking to move the majority of what we produce out of China and we're hoping that we get the majority of it out within 2025. Gotcha.

Okay. And then just moving on to the international segment. So know you guys did about $56 million in sales in 2024. Did you give an operating loss number for the segment and maybe I missed it. And also, you know, as far as the you know, that's concerned, it sounds like you expect to get to breakeven by 2026. Just wanted to confirm that.

Yeah. So let Larry answer the specifics. But we do expect from what we've already achieved and as the things that we're working on to have a substantial improvement in that performance in 2025. We look at that business and we want to accelerate that, and that's the whole purpose of Project Concord. So we're looking to get to a breakeven run rate by the end of 2025. But you know, because of the timing and the timing of making some changes we will be doing, we won't get to a breakeven level of profit in 2025. But we will in 2026.

Yeah. Anthony, our EBITDA loss came in just under $10 million. So e but that and the

Larry, do you have the EBIT number for 2024 for the Internet? EBIT would be

yeah, EBIT would be $10.5 million. Thank you very much. Alright. I'll pass it on to others, and best of luck to you guys.

Thank you. Our next question is from Brian McNamara with Canaccord Genuity. Please proceed with your question.

Congrats on the strong finish of the year. Thanks for taking the questions. So tariffs are obviously the topic that you're these days, and know you guys don't guide until May usually, but I'm curious if we can kinda drill down on your tariff exposure there. I think you kind of gave some broad strokes terms of being able to move production in the life, but I think we've seen from investors is they like kinda clear quantification of the relevant exposures if you if you'd be willing to provide.

So if you look at the global tariff on steel, the exposure isn't very strong, and it's they're not related specifically to China. But it doesn't impact us that much. If you look at the other exposures, it's a function of exclusions that are eliminated, you know, related to China. I'm sorry. And then the ten and ten are the incremental 20%. So, you know, if we look at 75% of our production being made in China, we're looking to reduce that hopefully by the end of this year to a much lower dependence. So taking over 50% of it outside of China. And really our focus is on our high volume runners. So the stuff that we would leave behind would be much slower and less impact to the total revenue that we shipped. Great. And then you know, a good strong start end of the year. So your sales kind of ended the year kind of flattish. Is it a reasonable expectation to expect a return to growth this year on the top line? And if so, what kind of drives that growth?

So, yeah, there's a lot of things that we talked about rolling over from what continues to that will continue to experience 2025. So disregarding, you know, disruptions to the macro environment and disregarding is gonna impact just the general economy going into a recession. Right? The momentum will continue on the food service business. And we'll see as we talked about portfolio growth from a smaller base. In that business. The international business will continue to see growth. And the, you know, Dolly Parton program, you know, we'll see growth over that. In terms of the total business is, you know, as our practice, will give guidance with our Q1 release.

Great. And then we saw the Dolly Parton and Dollar General press release on I think it was out of Monday. It said product available in their stores beginning March 1, then a summer collection in May, then an expected holiday collection. Is that March 1 timing in line with what you previously expected? And are these summer and holiday collections incremental to what you guys previously communicated, or was that all along the part of the plan?

Well, it continues to grow, Brian. So said another way, when we did our initial budget last year, Dolly Parton, it was lower than what we expect to do and what we you know, we flex every month. Right? What we know. So as we work with them, it continues to expand. And as I said, the good news is and it's put in they put in these tables if you've ever been to Dollar General. So as opposed to on shelf, and that's what the Dolly program does, and they've been putting in more. And the second round that launched this quarter again, had sales velocity better than everyone had hoped. And in line with last year, which is very, very strong, which continues to see traction there. We are also looking to roll the Dolly and will be rolling that out to other retailers and have commitments to do that. But also with Dollar General just with themselves, we are in discussions. That would be all incremental. That's not something we have in our plan or forecast at this point.

Great. And then one more on the top line. You know, sales end of the year flattish. Can you give, like, you guys own a bunch of brands. Can you give us an idea of what brands kind of outperform, what which ones grew last year, and maybe which ones are lagging and what maybe for the ones that are lagging, like, how do you kinda get those growing again?

Yeah. I'm tricky one. It's so many different brands across categories. But, you know, it's you look at if Barbara grew, and Farberware's growth was driven a lot, not a lot, but was driven was bolstered, I should say, by the growth in cutlery where we had tremendous success in the business, gained a lot of market share. Right? And if you look at just cutlery in general, you know, we grew substantially on a year-over-year basis. You know, but what we did see great growth in, Makasa and Farberware. We saw a decline a little bit in Taylor and False Graph. False Graph for us isn't an invest area. So, you know, as we've, you know, looked at the portfolio over the last several years and discussed a lot about repositioning, that's a good example of somewhere where we haven't put emphasis and we put more emphasis in Makasa. That's why you're seeing growth in one versus the other. You know, Taylor in general just kind of hit a wall we've a lot of growth over a few years. One thing though that we're launching this year two things, I should say. Which we think will hopefully reverse that trend is a more smart, sweet, branded, excuse me, family of products for our Taylor family of offerings, and also a new offering in Taylor that allow us to get more market space because it's a slightly different branded. So it's by Taylor to allow us to be sold in different places, particularly of our major retailers. And, you know, that will propel growth within Taylor. We also Rabbit declined, but Rabbit declined basically off of a banner year. And in, you know, one particular in the club channel, you know, they took a little bit of a breather. That's it was very well there. So that will rebound. So hopefully, that gives you some flavor of the different brands.

Yeah. Very helpful. Thanks a lot, guys. Best of luck this year.

Thank you. Bye.

Thank you. Our next question is from Christina Xu with DA Davidson. Please proceed with your question.

Hi. This is Christina on for Linda Bolton Weiser. So, just a follow-up on the tariff situation. So, I think you mentioned before that the biggest SKU volume product is now moved to Cambodia, and Trump was saying to apply reciprocal tariffs on countries that impose tariffs on the US products. So I was wondering if you could remind do you have any idea if Cambodia is currently currently has any kind of, like, tariff imposed on the US products?

Yeah. It does not. You know? But look, there's no visibility. It may change tomorrow. It may change completely differently the day after. There could be universal tariffs. There's a lot of moving parts, and we're just gonna have to react and manage. And we've moved to multiple. You know, we have we are moving product to many geographies, and Cambodia being one. It'll ramp up, and, you know, we'll have to react to any changes to the tariff regime and the trade wars as they unfold.

Okay. So and I think Mexico was recently tariffed. Like, can you remind us your exposure over there?

Well, you know, we had bought a Maquiladora facility in Mexico that we have now ramped up to full production. So we're starting to get the benefit of that. With a 25% tariff on China, there's a noticeable benefit for the maximum facility. If they put 25% tariffs on product coming out of Mexico, that benefit goes away. But now tariffs on related products from China are up to 45% and even 70% depending upon the item. So there's still benefits on the Mexico facility versus what we paid today.

Okay. And I think before it was you guys were saying the Dolly Parton shipping could exceed so exceed $10 million even with the with part of the shipments shipping to first quarter 2025. For 2024, I think there were $7 million shipped. So can you unpack a little to as to, like, why, that the shortage?

Yeah. Sure. So yeah, we expected around $10 million, but Dollar General made a decision to because of issues they were having to push some of that was that was scheduled to ship in over the third and fourth quarters. Push that into the first quarter, which we're now shipping. And that was $4 million. So that $4 million we're capturing, just we didn't capture it last year. So that would have brought our initial $10 million down to $6 million, and we shipped $7 million just because the business performed better. And the reason then we had anticipated, and that was the difference between the $6 million and $7 million. So it actually went up and or that was off of our initial belief is just something that moved into the first quarter. Of course, the $7 million, as you know, 100% incremental because it was all new business.

Okay. And I think you mentioned in the call that you observed weaker consumer sentiment. So I was just wondering, like, how much of a pricing power do you think that you have, if there are gonna be like, additional tariffs on your products?

So the magnitude of the tariffs in our view, make it mandatory that everyone you can't not pass it through. So what you're gonna see is and if you look at the major retailers, they've already said, look. Expect higher prices. It's just a reality unless the tariffs get reversed. So it's something that will absolutely happen, that price will get passed through, and then price is gonna be raised on shelf. Bigger question is, you know, in a consumer-driven economy, what does that do to the economy? But, you know, we will be passing through prices, you know, that'll take time. Which is why we built a buffer, but it's because we wanted to protect ourselves against the time. Because you just don't you know, when you work with the retail environment, it's just like we don't call them up and say, hey, prices are, you know, up 10%. We you know, it takes time to implement that, and that'll be over the next couple of months.

Okay. Thank you.

Thank you. This concludes our question and answer session.