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Thank you for standing by. At this time, I would like to welcome everyone to today's Hamilton Beach Brands Third Quarter 2025 Earnings Conference Call. [Operator Instructions] So with further ado, I will turn the call over to Brendon Frey, partner with ICR. Brendon, you have the floor.

Thank you, Tamika. Good afternoon, everyone, and welcome to the Third Quarter 2025 Earnings Conference Call and Webcast for Hamilton Beach Brands. Earlier today, after the stock market closed, we issued our third quarter 2025 earnings release, which is 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 risks 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 remarks and uncertainties is available in our 10-Q, our earnings release and our annual report on Form 10-K for the year ended December 31, 2024. 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. With that, I'll now turn the call over to Scott. Scott?

Thank you, Brendon, and good afternoon, everyone. Thank you for joining us today. Our third quarter performance represents a step in the right direction towards normalization following the significant disruption our industry faced after higher tariffs were implemented in April. As the third quarter progressed, retailers started to resume more typical buying patterns after destocking inventory purchases purchased evident in the sequential improvement in our year-over-year sales trend compared with the second quarter. While profitability declined more meaningful than revenue in Q3, this was driven primarily by onetime incremental tariff costs of $5 million and to a lesser extent, a timing mismatch between ongoing tariff rate increases and our pricing adjustments. This significant headwind was partially offset by a favorable mix shift led by increased penetration of our higher-margin commercial and health businesses. Importantly, we have fully absorbed the impact on gross margins from the peak tariff rate and have moved forward with a more balanced inventory position and a clear line of sight on returning gross margins more in line with historical levels. This will be achieved over the coming quarters through the strategic actions we've taken in response to higher tariffs. To review, we meaningfully accelerated our margin -- our manufacturing diversification efforts away from China to other APAC countries and remain nimble as multiple trade negotiations played out and agreements are finalized. With a more diversified geographical sourcing structure, we have the ability to quickly shift our procurement to markets that are in the best economic interest of the business. We took decisive actions, implementing increases at the end of June and August that align with the current tariff rate increases. Our retail partners have been understanding and acceptance of necessary price adjustments, which were carefully balanced to maintain our competitive market position while protecting margins. Our strong brand equity and market leadership have enabled us to take these necessary steps while maintaining our value proposition to consumers. And we have been implementing comprehensive cost management measures across the organization that generated $10 million in annualized savings with the benefit of these actions starting to materialize in the third quarter. Looking at the performance highlights by business division, our core business continued to expand its reach as we shipped our kitchen collections by Hamilton Beach line to a leading mass market retailer nationwide. This commercial -- this broader rollout increases our already significant retail presence and reinforces our market-leading position across the small appliance space. Looking ahead, our robust pipeline of new products in high-growth categories like blender kitchen systems, specialty coffee and air fryer should position us for further market share gains. Our premium business continues to perform well, highlighted by the successful launch of our high-end Lotus brand. Initial sell-through results have exceeded expectations by strong double digits, which is remarkable for a new premium line, especially as the majority of our initial advertising support for Lotus is planned for November and December. Based on this performance, we are actively negotiating to increase shelf space, positioning Lotus for even broader market reach. Beyond Lotus, we also have new innovative launches planned across our CHI and Clorox brand partnerships in the coming quarters that should help fuel further growth. Our commercial business delivered outstanding results in the third quarter. In fact, we believe inventory constraints limited our performance, which speaks to the strong and growing underlying demand for our innovative commercial solutions. Our recent Sunkist brand launch continues to be a resounding success with branded commercial juicers and sectionizers continue to deliver outsized results. Looking ahead, we are focused on accelerating our commercial business expansion through new channel penetration and expansion of our relationships with large food and hospitality chains. Furthermore, we are diversifying our manufacturing base for our commercial line to make sure we are positioned to fully capture the growing market opportunity ahead. Our newest division, Hamilton Beach Health achieved a major milestone by reaching positive operating profit for the first time this quarter. We're seeing new partnership deals develop, including a new specialty pharmacy partnership with CenterWell and Lumisir, both of which are top 15 specialty pharmacies in the U.S. Additionally, we saw the successful launch of a new HealthBeacon Harmony software product with Novartis Ireland with strong interest for expansion into other markets. Beyond these product advancements, the team has also recently implemented several digital improvements, resulting in a smoother patient experience, lower patient acquisition cost and higher conversion rates. These new developments, along with expanding our patient subscription base by 50% this year and the conditions treated using our SmartSharp system leave us very excited about HealthBeacon's future. Finally, our digital initiatives continue to gain traction this quarter. We exceeded our point-of-sale expectations during one of the largest digital retail events of the year. Looking ahead, we're placing a large emphasis on digital growth in Q4 to capitalize on the important holiday shopping season. In closing, we have greater clarity into our cost and pricing architecture now that tariff rates on certain Chinese imports have moderated significantly from the peaks reached in the second quarter and trade relations have improved. While uncertainty in the marketplace remains, we expect the strength of our brand portfolio, recent sourcing diversification efforts and pricing actions will lead to further top line and margin recovery in the fourth quarter. With that, I'll turn it over to Sally.

Great. Thank you, Scott. Good afternoon, everyone. As Scott detailed, our third quarter sales trend improved compared with the second quarter. And while gross margins were down year-over-year, the pressure was largely temporary and the impact from the peak tariff rate on China is now fully behind us. Turning to our results, starting with revenue. Total revenue in the third quarter was $132.8 million, down 15.2% from last year's third quarter, but up 300 basis points compared with the second quarter's year-over-year performance. The revenue decline was primarily driven by lower volumes in our U.S. consumer business, reflecting overall softness in consumer demand as well as timing of retailer purchases, specifically one large retailer that delayed orders for most of the third quarter. As a reminder, some retailers paused buying in the second quarter to assess inventory levels and price increases flowing from the new tariffs implemented by the United States in April 2025. While most retailers resumed buying in the second quarter, the [indiscernible] negatively affected volumes during the early part of the third quarter. Turning to gross profit and margin. Gross profit was $28 million or 21.1% of total revenue in the third quarter compared to $43.9 million or 28% in the year ago period. The decline in gross profit margin was primarily due to the flow of onetime incremental tariff costs of $5 million, the majority of which are related to the temporary 125% China tariff costs that were in effect for a period of time earlier this year. Additionally, gross margin was impacted by a delay between tariff-related rising costs and the effective date of pricing adjustments. This created a temporary compression of gross profit margin that we expect to normalize in future periods. It is important to note that excluding the $5 million of 125% onetime tariff costs, gross margin would have been $33 million or 24.8% of total revenue. Selling, general and administrative expenses decreased $8.2 million to $25.1 million or 18.9% of total revenue compared to $33.3 million or 21.2% of total revenue in the third quarter of 2024. The decrease was primarily driven by $6.8 million of lower personnel costs, including reduced stock-based compensation expense due to changes in our stock price year-over-year as well as benefits associated with the restructuring actions we took in the second quarter. Operating profit was $2.9 million or 2.2% of total revenue compared to $10.6 million or 6.8% of total revenue in the third quarter of 2024 as the temporary impact on gross margins from the peak tariff rate more than offset the expense leverage we delivered in the third quarter. Excluding the $5 million, 125% onetime tariff costs, operating profit would have been $7.9 million or 5.9%. Income before taxes was $2 million compared to $2.7 million. The prior year period included a onetime noncash charge of $7.6 million related to the termination of the company's overfunded pension plan. Income tax expense was $0.4 million in the third quarter compared to income tax expense of $0.7 million a year ago. Net income was $1.7 million or $0.12 per diluted share compared to net income of $1.9 million or $0.14 per diluted share a year ago. Now turning to our balance sheet and cash flows. For the 9 months ended September 30, 2025, net cash used for operating activities was $14.6 million compared to net cash provided of $35.2 million for the 9 months ended September 30, 2024. The decrease was primarily due to a $27.5 million change in accounts payable due to lower purchasing activity from decreased sales volume and inventory turnover as well as shorter payment terms with new suppliers under the company's China diversification initiatives. During the 3 months ended September 30, 2025, the company repurchased approximately 39,000 shares totaling $0.6 million and paid $1.6 million in dividends. On September 30, 2025, our net debt position or total debt minus cash and cash equivalents and highly liquid short-term investments was $32.8 million compared to a net debt position of $22.5 million at the end of the prior year period. In closing, we are encouraged with how we have navigated the dynamic trade environment this year. With greater clarity around the go-forward tariff rates for most all of the U.S.'s trade partners, the situation continues to stabilize. We anticipate that our fourth quarter results will show further progress towards improving our sales trend and gross margins. And while our continued recovery won't be linear in 2026, we expect our annual performance to benefit nicely from the actions we've taken this year, diversifying our sourcing structure and lowering our fixed cost base. This concludes our prepared remarks. We will now turn the line back to the operator for Q&A.

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

Thank you for the color around the gross margins. Can you please clarify the 370 basis point or $5 million tariff cost, was that a charge? Or how should we think about that? In the past, I believe you used FIFO accounting, and it's taken time for costs to flow through the P&L. And this seems different. What we hear you saying is that the $5 million charge was recognized in the quarter that those purchases were made. Just some clarity around that to help us understand that better.

Okay. Sure. Adam, so the costs relate to the 125% tariff that was temporarily put in place in the April time frame earlier this year. So you are right. These are costs that were incurred in April of this year that did flow through our P&L in the third quarter. And what it really represents is some containers that we had on the water when this spike in tariff occurred that we are not able to -- or we made the decision to not pass on to the consumer. And so for us to absorb as a onetime cost, and that flowed through in its entirety in the third quarter. And I think that's a little bit different from kind of the more go-forward increased tariffs that we're seeing from IEPPA in from China and other Asian countries. which we do consider part of our go-forward kind of cost structure and that we have taken actions to cover those additional expenses.

Okay. So the $5 million that you paid, you didn't -- it's not a charge on the P&L separately. It just flowed through in your cost of goods?

Correct.

[Operator Instructions] We do have a follow-up from Adam Bradley.

And can you expand a little bit on a more normalized rate from your largest retailer. Can you give us a little bit more color around that? The second quarter earnings report, you shared that they had pretty -- I may be paraphrasing here, but paused orders. And then it sounds like from what you are stating in this Q3 report that they continue to pause orders. Did they -- did you lose shelf space? Did -- are you back to normal ordering patterns? Are you almost back? What kind of color can you give us on that to help us understand sales trends?

Yes, Adam, this is Scott. So yes, on that customer and specifically, they -- you're right, they did pause placing orders. Their inventories got lower throughout that time period. But if you look now, we've been shipping them now for several months, and we feel like the business is back on track. As we indicated, we had a very robust promotional event in October, and that customer was included, and we exceeded our expectations with that customer. And we really, now looking into the fourth quarter, we feel like we're going to be having a record number of promotional activities this fourth quarter. And that customer, along with many of our other retailers will be part of that.

Are you experiencing any catch-up of inventory to replace what was lost? Or is it more of a normal flow?

I think we're kind of in the normal flow right now. I mean we had a little bit of a catch-up. The market has been a little bit different depending on the category of lower in units, but up in dollars because of price increases. But I think we're kind of back into a normalized pattern with this customer.

Okay. Great. Are you seeing a different behavior from other large customers? Or is it consistent with some of the larger ones?

No. I think for the most part, we feel like we're in a normal cadence with a lot of our -- a lot of -- I mean, actually probably with all of our retail partners. There was definitely that time period where they stalled in the second quarter, took a hard look. Some people were sitting on higher cost inventory that due to these surprising 125% tariffs and everybody is trying to figure that out. But I think really for the last -- most of the third quarter, with the exception of this one retailer, we were shipping as normal and promoting.

At this time, there are no further audio questions. I will now hand the call back over to our speakers for any closing remarks.

Thank you, Tamika. I think that's it from the Hamilton Beach brands. Appreciate everybody's time.