Hamilton Beach Brands Holding Co Q3 FY2024 earnings call

• Leadership changes: Scott Tidey became President and CEO on October 1st, succeeding Greg Trepp who retired at year end. Greg Trepp had led the company for 15 years.
• Financial performance: For the first nine months, revenue grew 5.3%, gross profit margin expanded by 480 basis points to 25.9%, operating profit almost doubled, and net income increased 19.2%. In the third quarter, revenue grew 2% and gross profit margin expanded by 190 basis points. Non-cash items like higher incentive compensation expense and one-time termination charge impacted operating profit and net income in the current quarter.
• Strategic initiatives: Expanding sales of innovative value products to command premium prices and improve margins. Launched over 40 new products across various categories. Focus on driving core brands Hamilton Beach and Proctor Silex in North America, gaining share in the premium market (about 40% of the industry), leading in the global commercial market with investment in higher margin products and international expansion, and accelerating growth of Hamilton Beach Health with the acquisition of HealthBeacon in February, revenue increasing quarterly and expected to contribute to operating profit in 2025.

In the third quarter of 2024, total revenue was $156.7 million, a 2% increase compared to the same period last year. The increase was driven by favorable product mix and higher volume, partially offset by average price decreases. Gross profit totaled $43.9 million compared to $40.1 million in the third quarter of 2023, with the gross profit margin expanding to 28% from 26.1% in the same period last year. For the first nine months of 2024, revenue grew 5.3% compared to the same period last year, and gross profit margin expanded by 480 basis points to 25.9% from 21.1% last year. The global commercial market experienced a revenue decrease due to soft international markets, especially in China. Additionally, there was $1.2 million of new revenue from the HealthBeacon acquisition in the third quarter, which has been growing each quarter and is expected to grow in 2025.

• Reaffirming full year 2024 outlook: Expect full year 2024 revenue to increase modestly and operating profit to increase significantly compared to 2023. Second half of 2024 gross profit margin expected to be comparable to the second half of 2023. Normalized cash from operating activities less cash used for investing activities expected to be in the $25 million to $35 million range for 2024, with expectation to end in the upper end of that range.

Q: Hi. Sally and Scott, congrats on another great quarter. My question is how correlated is the SG&A expense change to that of gross margin rather than sales? Specifically, wanting to know if gross margins were to begin to normalize back to historic levels, would portions of SG&A also come down.

A: Sally Cunningham responded that inherently within SG&A, there is the ability to constrict or expand as needed. If gross profit margin started to constrict, controllable expenses would be looked at and right-sized. Scott Tidey added that the company is focused on bringing out new products to continue pushing up gross profits and feel there is space to continue growing and driving more market share, which relates to the sustainability of gross margins and potential impact on SG&A