Hamilton Beach Brands Holding Company (NYSE:HBB) Q1 2024 Earnings Call Transcript

Rapid growth is being driven by technology, innovation and a growing shortage of medical staff that formally treated certain conditions in office settings. These solutions improve accessibility to health care services for many people. They enable providers to identify changes in the patient’s status and facilitate faster interventions. Most importantly, they enable patients to participate more actively in their health care journeys, leading to more favorable outcomes. Our strategy is to combine our strengths, including our trusted brand name and our leadership in innovative product development, engineering, sourcing, marketing, sales and distribution with partner companies that have strengths in areas such as digital capabilities and patented technologies.

HealthBeacon brings a number of these strengths, including strong specialty pharmacy relationships along with the know-how, software, patents and IP that are needed to support the system we provide to patients who are managing chronic diseases. The primary system we currently provide is called the Smart Sharps Bin from Hamilton Beach Health. Patients receive a countertop device that we help design, source and distribute. This device is connected to an app that uses patented technology to provide medication reminders, tracking and 24/7 patient support. The countertop device has a protected container inside that serves as receptible for used sharps. Once the bin begins to fill up, technology provides an alert for a new one to be sent automatically and the patient returns the container with the used sharps and the prepaid package for safe disposal.

While we’ve been working with HealthBeacon team for the past 3 years, we are further integrating our team and resources and that process is going very well. We are optimistic about expanding this business over time. We are working with existing specialty pharmacy customers to add patients to the roster of subscribers who use our system. We are also working to secure business with additional specialty pharmacies. Further, we are working to add new treatments to the program, thereby increasing the number of chronic conditions that are managed using our system. We see the acquisition of HealthBeacon as the first step in increasing our participation in the home health care management business. We are in discussions with other prospective partners, particularly ones with unique technological capabilities who could significantly benefit from collaborating with partners like us with our broad commercial agencies [ph].

Next, I will discuss our strategic initiative for [ph] Hamilton Beach and Proctor Silex brands. Our 2 core brands have served the needs of consumers for over 100 years. These 2 brands are known for quality, durability and innovation. We participate in more than 50 categories. In the U.S., Hamilton Beach is the number 1 selling brand based on units sold in the small appliance and garment care industry. In the e-commerce channel, Hamilton Beach and Proctor Silex, both have 4.4 average star ratings and favorable reviews. In recent years, we rebranded Proctor Silex as Simply Better. This product line is targeted to consumers who deserve attractive — who desire attractive but practical product design and essential functionality, without a lot of options and extras at the accessible [indiscernible].

In the first quarter this year, unit volume for our core consumer brands increased 9.5% and dollar sales were nearly 2% or nearly — were up nearly 2% compared to a year ago. This followed an impressive performance in 2003 when sales of these brands were flat with 2022, outperforming the industry by more than — by the industry’s more than 5% decline. Our goal for the Hamilton Beach and Proctor Silex brands is to further increase our growing share. We devote significant resources to investing in our core competencies that are critical to creating a competitive advantage and driving share. These include innovation, new product development and digital marketing. We refresh existing products and develop new ones based on consumer-driven research.

Let me mention a few of the new product innovations we are launching this year. We have further evolved our popular line of FlexBrew coffeemakers. We pioneered the concept of a multiuse machine that brews a single cup or a carafe of coffee. Our latest model provides a faster brewing time. It can make hot or iced coffee using either pods or ground coffee. It is programmable and provides a removable reservoir that fits on the side or the back to enhance counter space. We expect this new line to be a strong contributor as we have already have broad support from major retailers. Also in the coffee category, we have added several new espresso machines, increasing our participation in the category that is fast growing. In the slow cooker category, we have answered the consumer’s desire to start recipes using frozen foods with new models that defrost first and then cook, saving cooks a lot of time.

We have also further evolved our extensive line of air fry toaster ovens, regular and personal blenders and hand and stand mixers, all of which are particularly good sellers for us. Next, I’ll discuss our progress to gain share in the premium market. The premium part of small appliance market accounts for more than 40% of the total industry dollars. We have been increasing our participation in the premium market by developing, licensing and acquiring new brands. Our own premium brands include Weston and Hamilton Beach Professional. We license the brands for CHI premium garment care products, Clorox True, HEPA air purifiers and Brita Hub, countertop electric water filtration appliances. We have an exclusive multiyear agreement to design, sell, market and distribute Bartesian premium cocktail delivery machines.

In March of last year, we announced a similar agreement with the company by the name of Numilk to provide the next generation of specialty appliances to create a variety of fresh plant-based milk products in the home and in commercial establishments. The Numilk Home Machine is available for purchase on Numilk.com and will soon be available on Amazon. We are incredibly pleased with the sales of our CHI garment care products. We recently introduced 3 new irons and a garment steamer featuring CHI’s Lava technology which they used in their curling and hairstyling irons. Lava is a great heat conductor and we’re excited to deploy this innovative technology and our products. Based on several new placements we have secured, we look for CHI to be a meaningful contributor to our sales of premium products this year.

We’re experiencing great momentum and significant point of sales gains with our line of Clorox air purifiers. We also planned a launch in Clorox humidifier this summer. We believe we are well positioned to drive our Clorox brand business going forward. In 2023, the premium market accounted for 15% of our total revenue. Last year, while sales of premium products overall decreased compared to ’22, they increased 10% in the fourth quarter. Sales were down in the first quarter of this year which we attribute to seasonality following our strong holiday selling period and to a certain extent, the impact of inflationary pressures on consumer spending. We remain confident in the opportunity to increase our partnership in the premium market and its potential to contribute to our revenue growth and margin expansion over time.