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Thank you for standing by. At this time, I would like to welcome everyone to Hamilton Beach Brands 2025 Fourth Quarter and Full Year Earnings Conference Call. [Operator Instructions] So without further ado, I would like to turn the call over to Brendon Frey, partner with ICR. Brendon, you have the floor.

Thanks, Krista. Good afternoon, everyone, and welcome to the Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast for Hamilton Beach Brands. Earlier today, after the stock market closed, we issued our fourth quarter and full year 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 risks 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. And now I'll turn the call over to Scott. Scott?

Thank you, Brendon and good afternoon, everyone. Thank you for joining us today. We are pleased with our fourth quarter results, which meaningfully exceeded our expectations and represent an important step forward and our recovery from the tariff-related disruptions we faced throughout 2025. Fourth quarter revenue was nearly flat with the year-ago period with gains in commercial and health, offset by a modest decline in our core consumer business. Our top line performance represents a significant sequential improvement from the double-digit declines we experienced in the second and third quarters and demonstrates both the resilience of our business model and the effectiveness of the strategic actions we implemented throughout the year. At the same time, we grew fourth quarter operating profit by 8%, driven by a 220 basis point year-over-year increase in gross margins to 28.3%, which was more than 700 basis points higher than the third quarter. This improvement reflects the successful implementation of our pricing strategies, improved customer and product mix and continued ramp-up of our commercial and health divisions. We are very encouraged with our overall results to close out what was a tumultuous year. Looking back on 2025, it was undoubtedly a challenging period marked with unprecedented tariff increases that created a significant industry-wide disruption. That said, full year revenue was only down approximately 7% and with the decline coming from lower volumes in our U.S. consumer business as retailers adjusted their buying patterns in response to higher tariffs, including suspending purchasing for a 6-week period in April and May at the height of the tariff uncertainty. And if you exclude the $5.3 million in onetime incremental tariffs we incurred in 2025 and the $1.6 million from the accelerated depreciation and write-off associated with our legacy ERP system, our full year operating profit was $0.3 million above 2024 levels. I'm incredibly proud of how our team responded with agility and decisive action. We successfully navigated through the most difficult period in the second quarter when sales declined high teens, and we've seen sequential improvement each quarter since then, culminating with near parity in Q4's year-over-year comparison. The strategic actions we implemented, including manufacturing diversification away from China, selective pricing adjustments, comprehensive cost management measures and proactive inventory management have positioned us well for a return to growth in 2026. Despite the challenging environment, we continue to execute against our strategic initiatives, and I'm particularly excited about the progress we've made in several key areas. Our premium business delivered a major step forward with the successful launch of our Lotus brand. The initial sell-through results have exceeded our expectations by strong double digits, which is remarkable for a new premium line. Based on this early success, our key retailer has committed to increased shelf space as we position Lotus for broader market reach. Our commercial business delivered very good results throughout 2025, representing about 10% of total revenue with significant room for growth. Our commercial business grew over 15% for the year, driven by our Summit Edge blender with advanced blending and mixing technologies which can be found globally in major restaurant and convenience stores. Another major highlight from the past year was our agreement with Sunkist to develop and market Sunkist branded commercial juicers and sectionizers. Launched in Q2, results continue to exceed expectations as demand from leading restaurants, hospitality chains and schools for these innovative products has accelerated faster than we anticipated. Hamilton Beach Health reached a significant milestone, achieving positive operating profit in the third quarter of 2025, just 18 months after the HealthBeacon acquisition and again in the fourth quarter, this performance was driven by expanding our specialty pharmacy partnerships with new agreements, including Synerwell and Lumicera, successfully launching our HealthBeacon Harmony software products with Novartis and achieving our goal of increasing our patient subscription base by 50% this year. Before moving to our view of this coming year, I wanted to emphasize the significant progress we've made in reducing our tariff exposure and strengthening our supply chain resilience. Tariffs currently at parity across the APAC countries we source from we built a core competency that allows us to shift manufacturing between countries based on economic benefits. In some cases, it's more economically beneficial to manufacture in China, while in others, it's more cost effective to source production from Vietnam, Thailand or Indonesia. This flexibility allows us to react quicker should tariff rates for one or more of these countries change or the administration tariff policies change like they did following the Supreme Court's decision last Friday. Looking ahead to 2026, we're particularly excited about several growth drivers, starting with driving growth of our core business. Our robust pipeline of new products in high-growth categories like blender kitchen systems, garment care and single-serve coffee position us well for further market share gains. In the coming quarters, we will be bringing to market 3 new blender systems, a redesign of our successful Durathon Iron platform, new Durathon and CHI garment steamers, a large segment we believe can grow significantly and 2 new single-serve coffee platforms, bringing much needed innovation to the space. In support of these initiatives, we are making incremental investments and innovation to drive growth while significantly increasing our investment in digital, social media and influencer marketing. This also ties into our [Technical Difficulty] initiative to accelerate our digital transformation. The way the consumer is exposed to our brands and products has changed dramatically over the last 5 years. Add generative AI-assisted shopping, and this will only accelerate changing shopping habits in the years to come. We start with a strong foundation with our e-commerce capabilities. We enforce that foundation with consistent, strong consumer reviews and ratings averaging above 4 stars across our brands. However, we are having to pivot quickly to better connect with the consumer. We must be relevant when the consumer decides to buy their appliance, and we must be present and featured across a variety of platforms to influence their purchase decision. To do this, in 2026, we've increased our advertising investment to more than the past 4 years combined and invested in resources to improve discoverability with consumers and sharpen our AI shopping tactics. Moving to our third initiative, gaining a larger share in the premium market. A big part of this strategy revolves around the Lotus brand expansion. Lotus is more than just a brand of chef-inspired tools. It is a promise of culinary confidence, a philosophy focused on savoring and sharing passionate preparation and its delicious results. Both lines, Lotus Professional, which launched in 2025 and Lotus Signature scheduled to launch this fall, play in the biggest premium categories at premium price points. This validates our strategy to capture share in the premium market, which represents approximately half of the U.S. appliance market totaling over $4 billion, where we currently hold only about 1% market share, providing significant growth runway. We're supporting these launches with $6 million in marketing investment over the 15-month window, including $2 million spent in 2025. Our fourth initiative is to lead in the global commercial market. We're focused on new channel penetration and expanding relationships with large food service and hospitality chains with particular emphasis on regional and global chain penetration. The Summit Edge high-performance blender continues to be a big success. Carefully engineered and built to last for years of reliable performance, the Summit Edge continues to be placed in chains across the world. The team is also partnering with several large chains to launch multiple automated beverage products that deliver high-quality outcomes for their new menu items. Our final initiative is to accelerate growth of Hamilton Beach Health. Our primary product is currently the Smart Sharps Bin for injectable medication management. Our plan going forward is to broaden our offering, including products that combine hardware and software to solve in-home patient pain points and expand our distribution network with other large specialty pharmacies. To date, we've been focused on expanding our injectable reach by adding more specialty pharmacies and pharmaceutical companies to the platform. In the second quarter, we will be in trial with the pill management platform aimed at improving adherence and providing patient feedback. We are targeting the areas of oncologic and mental health with plans to expand in other areas of treatment in the near future. As you just heard, we have several exciting initiatives in the works and are better than -- as you have just heard, we have several exciting initiatives in the works and our better-than-expected fourth quarter performance has added to our optimism about our growth prospects in the coming year. Sally will provide more specific details about our outlook shortly, but we do expect revenue to return to our historical rate of growth in the mid-single-digit range in 2026, even as we face a roughly $22 million sales headwind from the expiration of our license agreement with Bartesian at the end of 2025. In closing, while 2025 tested our organization in unprecedented ways, we emerged stronger and more resilient. The decisive actions we took have positioned Hamilton Beach Brands to return to growth while maintaining our market leadership, which includes our position as the #2 small kitchen appliance brand in the U.S. by units sold, and #4 in terms of dollars, a position we intend to strengthen even further. We believe that our diversified business model, strong brand portfolio and the strategic investments we've made in premium, commercial and health divisions, [Technical Difficulty] multiple avenues for growth. The foundation we built through manufacturing diversification, pricing optimization and strategic cost management position us to capitalize on improving market conditions while continuing to invest in the segments that represent our greatest growth opportunities. We entered 2026 with renewed confidence in our ability to deliver sustainable long-term growth and shareholder value. I want to thank our global team for their exceptional dedication and execution throughout this difficult year. Their resilience and commitment to our customers and shareholders have been instrumental in positioning us for the recovery ahead. With that, I'll turn it over to Sally.

Great. Thank you, Scott. Good afternoon, everyone. We closed out 2025 with fourth quarter results that exceeded our expectations across the board, providing us with good momentum to continue our recovery in 2026 from the tariff-related pressure that negatively impacted our performance this past year. Starting with the fourth quarter. Revenue was $212.9 million compared to $213.5 million a year ago, a decline of just 30 basis points. After growing sales by 4% in Q1, sales were down 18% and 15% in Q2 and Q3, respectively, as we absorbed the impact from higher tariffs and their effects on demand. Therefore, we are very pleased with the sharp sequential acceleration in our top line trend we witnessed in Q4 as sales were nearly level with the same period of 2024. This performance was driven primarily by growth from our commercial and health businesses, offset by lower sales volumes in our U.S. consumer business. While down year-over-year, demand for our consumer products improved significantly on a sequential basis as that business further recovers and returns to normalization. Turning to gross profit and margin. Gross profit was $60.2 million in the fourth quarter, up 8% compared to $55.8 million in the year ago period. Gross profit margin was 28.3% compared to 26.1% of total revenue in last year's fourth quarter. The 220 basis point improvement in gross profit margin due to favorable product and customer mix from the growth in our commercial and health businesses as well as labor and logistics efficiencies and a product margin benefit from the timing of price increases. Selling, general and administrative expenses increased to $34.7 million compared to $32.1 million in the fourth quarter of 2024. The increase was primarily driven by higher performance-based compensation expense as we needed to catch up our accrual in the fourth quarter as results came in higher relative to our projections earlier in the year. This year's SG&A also included $1.5 million in additional advertising spend and $1.6 million from the accelerated depreciation and write-off associated with our legacy ERP system, which we are in the process of replacing, partially offset by the restructuring actions we took during the second quarter. Our strong gross margin gains allowed us to increase operating profit by 8% to $25.4 million compared to $23.6 million in the fourth quarter of 2024, while operating margin expanded by 90 basis points to 11.9% in the fourth quarter of 2025. Net interest expense in the fourth quarter was $430,000 compared to $283,000 a year ago due to higher debt levels, partially offset by lower interest rates compared to the year ago period. Income tax expense was $6.5 million in the fourth quarter compared with a $1 million benefit in the fourth quarter a year ago. The $7.5 million change in our tax is primarily due to a $4.3 million foreign tax benefit and a change in U.S. tax accounting method that benefited the year ago period. Net income in the fourth quarter was $18.5 million or $1.38 per diluted share compared to net income of $24 million or $1.75 per diluted share a year ago. In terms of the full year, revenue was $606.9 million, down 7.3% from $654.7 million in 2024. From where things stood midway through the year with respect to tariffs, we are pleased with our ability to navigate these headwinds and end 2025 with sales down less than $50 million. Similarly, we are pleased that full year gross margins were down only 30 basis points to 25.7%, considering we incurred $5.3 million of onetime incremental tariffs in 2025. On a reported basis, 2025 operating profit was $36.6 million or 6% of sales compared to $43.2 million or 6.6% of sales in 2024. That said, if you exclude the onetime incremental tariff expense and the accelerated depreciation and write-off related to our enterprise software transition, 2025 operating profit actually increased to $43.5 million or 7.2% of sales. Our full year net income was $26.5 million or $1.95 per share compared to $30.8 million or $2.20 per share in 2024, with effective tax rates of 25.8% and 7.8% in 2025 and 2024, respectively, reflecting the aforementioned nonrecurring foreign tax benefit and change in U.S. tax accounting method in 2024. Now turning to our balance sheet and cash flows. For the year ended December 31, 2025, net cash provided by operating activities was $13.8 million compared to $65.4 million for the year ended December 31, 2024. The decrease in net cash from operating activities is primarily due to an increase in net working capital, including lower accounts payable as we anniversary the inventory builds of late 2024. In addition, income taxes payable was lower in 2025 due to the impact of the One Big Beautiful Bill, while lower incentive payables decreased our other liabilities. During the 12 months ended December 31, 2025, we allocated our cash flow to repurchase approximately 507,000 shares totaling $9 million and paid $6.4 million in dividends. At the end of 2025, net debt was $2.7 million, compared to a net cash of $600,000 on December 31, 2024. I want to highlight that we returned more than 58% of our 2025 net income to shareholders through a combination of share repurchases and dividends. Now turning to our outlook for 2026. As Scott mentioned, we expect to return to growth in 2026 as our consumer business further stabilizes, and we drive further gains in our commercial and health business. Based on the assumption of a more stable operating environment in the U.S., partially offset by the expiration of our licensing agreement with Bartesian at the end of 2025, we currently expect revenue growth to approach the mid-single-digit range in 2026. For modeling purposes, we expect growth to be weighted towards the second and the third quarters. With respect to gross margins, we expect 2026 gross margins to be similar to slightly better than 2025. Operating profit on a reported basis is expected to decline low teens on a percentage basis, inclusive of approximately $6 million in accelerated depreciation associated with our legacy ERP system and an incremental $6 million in planned advertising spend, particularly in the second half of 2026 to support our strategic growth initiatives. Cash flow from operating activities less cash used for investing activities for 2026 is expected to be in the range of $35 million to $45 million, reflecting an outsized increase due to the normalization of tariff-related impacts on our net working capital. In closing, we are pleased to close out 2025 on a high note and believe our strategic initiatives have us well positioned to fuel growth and increase shareholder value in 2026 and beyond. This concludes our prepared remarks. We will now turn the line back to the operator for Q&A.

[Operator Instructions] Your first question comes from the line of Gowshi Sri with Singular Research.

Can you hear me?

Yes.

As you look at early '26, how are your big-box partners behaving now that price increases have fully flowed through? Are you seeing any signs of trade down category contraction or promotion pressure that feels different to 2025?

No. I think our big-box retailers are kind of back to business as normal. I mean I think there's a lot of still uncertainty around where the tariff rates will go in the future. But right now, we're running our normal promotions. They're doing their normal promotions. It seems like their inventory and weeks on hand seem to be similar. And I would say things are getting back to a more normalized period.

Okay. And just my follow-up. With the Lotus performing kind of ahead of expectations, how confident are you that the premium growth is net incremental versus cannibalization of your existing good or better offering? Are you seeing any evidence that the premium consumer is distinct in terms of retailer price point usage? Or is there some trade-up from the legacy range?

Yes. No, I would say Lotus is really completely incremental from where it's positioned in the retailers that it's sold in and the price points. I mean, so we're such in different price points from where our core brands are positioned. Lotus is really up in that premium segment at the middle and higher ends. And so we see that as all being incremental.

Your next question comes from the line of Adam Bradley with AJB Capital.

Scott and Sally, it's good to see the sales resumption. Can you tell us how much of the sales resumption was restocking in mass versus actual end consumption?

I mean I think POS, right, was pretty consistent with what we saw.

And then a quick follow-up then. Is the -- can you take us through a little bit more of the $12 million that you highlight in the -- in your release, you got $6 million of the accelerated depreciation plus $6 million of incremental advertising spend. Can you give a little more detail on the parts and the strategy on both of those? For example, where will the advertising be targeted? You mentioned it a little in your comments, but how much is Lotus versus -- if you mentioned Lotus in the past, how much is Lotus versus all other categories? And then separately, what's leading to the accelerated depreciation of the ERP system? Is it going away? Or what's happening there?

I'll start on the advertising and let Sally take over on the accelerated depreciation. So on the advertising front, it's about a 40-60 split between premium and core with about 40% of it being in the premium and 60% being in the core. And both of them are significant increases from where we've been doing in the past. And both of them will have different strategies because the customer base is very different from those brand positionings. But at the end of the day, we feel like we've got to be much more relevant with our brands and consumers looking to shop. And so we got to reach them on a number of different social platforms, and we feel like [Technical Difficulty] be growing like we want to be growing that there's going to be an investment we're going to continue to try to ramp-up.

And then I'll speak to the accelerated depreciation. We -- as part of our strategic initiatives, we're also investing in technology. And so we are upgrading our ERP platform, which is causing us to accelerate the depreciation on the existing one. And we're doing that really just to be able to unlock benefits from emerging technologies once we move to the new platform.