Good morning, everyone, and welcome to Lifetime Brands' First Quarter 2022 Earnings Conference Call. I would now like to introduce your host for today’s conference, Andrew Squire. Mr. Squire, you may proceed.

Thank you. Good morning and thank you for joining Lifetime Brands first quarter 2022 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’d 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 today’s press release and others 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 today’s press release also contained 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 to 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 to discuss Lifetime Brands’ first quarter 2022 financial results. Lifetime has achieved strong results for several years, and we have maintained this performance during the first quarter of 2022. This quarter is only the second time in the company’s history where we achieved profitability during the first quarter of the year as the seasonal nature of our business usually delays profitability until later in the year. This continued strong result shows the strength of our business model. Compared to the first quarter of 2021, which was a record first quarter for Lifetime, our net revenues, operating income, and adjusted EBITDA declined, driven by the impact of inflation, supply chain disruptions, and other macro factors such as the war in Ukraine. Our gross margin also declined year-over-year in the first quarter as a result of these impacts. However, compared to the 2019 quarter, which is a relevant benchmark prior to the significant macroeconomic impacts of COVID-19, inflation, and supply chain disruptions, our growth in net sales, operating income, and adjusted EBITDA is 22%, 290%, and 109% respectively. Overall, we are pleased with our operational performance and the progress in the business during the quarter. We have generated $91.1 million in adjusted EBITDA over the last 12 months, and we remain on track to achieve our long-term targets, which I will touch on in more detail later. Sales in the quarter were negatively impacted by a delay among large omnichannel retailers in their planogram resets, which have shifted to the second quarter from the first quarter, a streamlining of inventory positions in many retailers, and a softening of order flow, particularly in the online channel. Aided by a favorable mix, we were able to improve gross margin percentage through the benefit of new product introduction and price increases. Price increases also had a favorable impact on revenues. In our core U.S. business, we also saw the impact of inflationary pressures on end-market demand, which continues to be at substantially higher levels compared with 2020 and prior to the onset of COVID in 2019. Accordingly, Lifetime continues to perform very well within our industry segments. We gained or maintained market share across our product categories and we made additional progress on our growth plans. We also successfully expanded the KitchenAid brand, and the cutlery line performed well in the first quarter. Our beautiful brand remains on plan and we are having good conversations with Walmart about adding more product categories, which will create additional growth opportunities in 2023 and beyond. On our last call, we discussed the acquisition of S’well Bottle, which has since been integrated into our portfolio. S’well’s contributions were not material to Lifetime in the first quarter. The e-commerce channel declined in absolute dollars and percentage in the quarter driven by a slowdown of demand in this channel, particularly at Amazon. E-commerce sales were 19.1% in the first quarter of this year, compared to 20.6% a year ago. Over-inventory positions at Amazon and other pure-play e-commerce retailers, and a higher percentage of consumers returning to brick-and-mortar retailers impacted e-commerce retailers in the first quarter. Of note, we have seen an uptick in demand from this channel in the second quarter so far. On direct-to-consumer, we continue to make progress, particularly with our Year & Day and PlanetBox businesses. We expect our direct consumer sales to continue to increase over time. Supply chain costs and availability continue to be challenging with higher freight in and freight out costs coupled with shipping delays and availability which have led to delayed shipments and, in a few cases, canceled orders. We have maintained our strategy of carrying high levels of inventory to mitigate these challenges. While this increases our distribution expense, this strategy has remained a strong competitive advantage for Lifetime, which we continue to translate into high market shares and distribution gains. Of note, we have recently solidified our long-term ocean freight contracts in line with rates that we have anticipated, having a positive impact on our costs. We are currently shipping over 98% of our ocean freight under contract compared to less than 60% in 2021. Turning now to our international business, our European business faced significant demand headwinds resulting from uncertainty caused by the war in Ukraine and more severe COVID shutdowns in Europe and Asia. Despite these challenges, our European business achieved sales relatively flat to the prior year. In Asia, due to supply chain issues, our Australia and New Zealand business declined, which resulted in an overall decline in our international sales for the quarter compared with the prior year. Taken as a whole, as evidenced by these results, we continue to make exciting progress in Europe and are gaining traction with our direct model. We are achieving significant customer wins with major chains, including Carrefour, one of the largest global supermarket chains, and Next, one of the fastest-growing retailers in the UK. With Carrefour, we are currently providing products in France only. However, we see a large opportunity to expand both within France and to other European markets moving forward. In addition, an important strategic initiative was achieved in March with our new distribution facility in the Netherlands going online, and we will be at full functionality by the end of the second quarter. This new facility will give us the ability to grow our top line while reducing operating costs for our European business. This quarter, we incurred some one-time upfront costs as a result of moving initial inventory over from our UK facility. Going forward, the facility in the Netherlands will be able to take delivery directly from our manufacturers in Asia and ship across the continent within 24 to 48 hours. In commercial food service, our matured back-of-the-house business, which was already an industry leader, made significant gains in the first quarter. More importantly, Mikasa Hospitality, our strategic growth initiative for front-of-the-house, is making exciting progress. The business continues to ramp up and we have one additional significant account such as the Venetian in Las Vegas. We continue to invest in top talent to build out the business and we recently hired a new senior executive with 25 years of commercial foodservice experience to run the foodservice business and drive our expansion forward. Finally, Lifetime has continued its expansion into adjacent categories, including outdoor, pet, and storage and organization. Following our promising results last year across these categories, we anticipate some positive impact this year with additional benefits to be realized over the coming years. Let me now turn to a discussion of our financial guidance. We issued our full-year guidance for 2022 in our press release this morning. To recap, we expect to see moderate top line growth in 2022 with the bottom line remaining slightly down compared to 2021. We anticipate inflationary cost pressures will remain or accelerate during the year and our ability to fully mitigate such impacts will not be achieved until 2023. During the year, we still expect to generate significant operating cash flow with ample liquidity supporting our strong balance sheet. Our 2022 guidance reflects the softening of demand we are seeing as a result of continued inflation as well as continued supply chain challenges that are not unique to Lifetime and the uncertainty in Europe that I just discussed. As we look ahead to the remainder of the year, we are facing a world with limited visibility for a variety of reasons. And we expect these pressures will persist throughout the remainder of 2022. However, our business model has proved resilient through all market cycles, giving us confidence in our ability to continue to deliver strong results in the current environment. Our strong balance sheet and cash generation remain significant competitive advantages for Lifetime as we invest in inventory levels and other strategies that will enable us to continue gaining or maintaining market share across our product categories. In addition to allowing us to maintain and improve our gross margins and operating margins, we believe that our leading brands, strategic growth initiatives, and financial flexibility will continue to drive significant shareholder value and enable us to execute against our long-term growth and profitability objectives. Before I hand the call over to Larry, I want to expand on a comment I made at the start of my remarks. Lifetime remains on track to achieve the goals we announced in our 5-year plan. While our results were down for the quarter year over year, the outstanding progress that our team made last year, coupled with the mitigation efforts we have taken, have kept us on course. We remain confident in our ability to generate approximately $1.25 billion in net sales and $145 million of EBITDA by 2026. Importantly, the remarkable progress we made over the past two years towards achieving our long-term goals has provided some cushion as we effectively manage through current challenges. As a reminder, we grew adjusted EBITDA by almost 50% between 2019 and 2021. So our recent performance demonstrates we are on the right track forward. We intend to achieve this growth through multiple levers, including stronger organic growth, further penetration in the commercial foodservice markets, expanding our presence and profitability in international markets, continued expansion into adjacent categories, and incremental growth through disciplined, strategic M&A such as our recent acquisitions of Year & Day and S’well. Since announcing this plan in November of last year, we have progressed across all five of these levers, and I am confident we will continue to execute despite current macroeconomic conditions. In closing, Lifetime is well prepared to navigate the current environment and very well positioned for the long term. Again and again, we have shown a proven ability to manage through a variety of business cycles, and we are executing on or ahead of plan on every single one of our growth drivers. We look forward to continuing to advance our strategy and create value for our shareholders. With that, I will now turn the call over to Larry.

Thanks, Rob. As we reported this morning, net income for the first quarter of 2022 was approximately $400,000, or $0.02 per diluted share, versus net income of $3.1 million, or $0.14 per diluted share in the first quarter of 2021. Adjusted net income was $1.4 million for the 2022 quarter, or $0.06 per diluted share, as compared to adjusted net income of $2.8 million, or $0.13 per diluted share in 2021. Income from operations was $4.4 million within the 2022 quarter as compared to $9.2 million in the 2021 period. Adjusted income from operations for the first quarter of '22 was $6.8 million as compared to $9.4 million in the 2021 period. Adjusted EBITDA was $91.1 million and $95.1 million for the trailing 12-month period ended March 31, 2022, and December 31, 2021, respectively. Pro forma adjusted EBITDA, which includes historical results as well as pro forma projected synergies adjustments, was $95.1 million for the trailing 12-month period in March 2022, and also for the December 2020 period. Adjusted net income, adjusted income from operations, and pro forma adjusted EBITDA are all non-GAAP measures and are reconciled to our GAAP measures in the earnings release. The new items in the current quarter for non-GAAP measures relate to the acquisition of S’well and the opening of the Netherlands third-party operated distribution facility. Following comments over the first quarter of 2022 versus 2021 unless stated otherwise. Consolidated net sales declined by 6.6% despite approximately a 5% product price increase. But as Rob commented, compared to the first quarters of 2020 and 2019, consolidated sales rose 26% and 22% respectively. And if you look at this same metric for the U.S. business, first quarter of 2022 net sales compared to the first quarters of 2020 and 2019 rose 29% and 31% respectively. The U.S. segment sales declined by $10 million to $166.2 million. This decrease mainly affected kitchenware and tableware products reflecting the timing of retailer planogram resets and inventory streamlining. This is partially offset by higher sales in home solutions driven by a new warehouse club program for bar and wine products. International segment sales were down by $3 million to $16.5 million on a report basis, with a $2.5 million decline in U.S. dollars. Sales in Europe, including the UK, were even, but mixed among distribution channels. The segments' decline was due to supply chain constraints affecting a distributor for Australia and New Zealand. Gross margin percent increased to 34.5 from 33.7. For the U.S. segment, the gross margin percent was 34.7% versus 33.9%. For international, gross margin was 32.7% compared to 31.8% last year. The improvement in gross margin for the U.S. segment was driven by a tariff reduction on certain products and payroll category mix. This is partially offset by higher input costs. The improvement in gross margin percentage for the international segment was driven by customer mix. This improvement was partially offset by higher duties on goods shipped from the UK to continental Europe. The opening of the Netherlands third-party logistics facility will eliminate this. Distribution expense as a percentage of net sales increased to 10.5% from 9.5%. For the U.S. segment, distribution expenses as a percentage of goods shipped from its warehouses increased to 9.9% from 8.9%. This increased rate was attributable to lower ship volume. Officially, the rate was adversely affected by higher inventory levels which reduced labor efficiency, as well as general inflationary conditions. For the International segment, distribution expenses, as a percentage of goods shipped from its warehouses, excluding expenses to relocate inventory to the new Netherlands facility, was 21.7% in 2022 and 14.4% last year. This increase is primarily attributable to higher freight costs for products shipped from the UK to continental Europe and an increase in UK business occupancy tax. In April, we began shipping from the new distribution facility in the Netherlands. This will lower shipping costs for goods shipped to continental Europe customers. So, in general, administrative expenses were 39.5% for 2022 and 38.1% in 2021. U.S. segment expenses was $28.5 million versus $27.4 million in 2021. And as a percentage of net sales, SG&A expense increased to 17.1% from 15.6%. The expense increase was mainly from the integration costs related to the S’well acquisition. SG&A expenses for the International segment were $5.1 million in the 2022 quarter compared to $5 million last year. The increase was due to foreign currency transaction losses offset by lower amortization expense on intangible assets that were impaired in the fourth quarter of last year. Unallocated corporate expenses were $5.9 million in the 2022 quarter and $5.7 million last year. The increases were driven by an increase in legal and professional fees related to the S’well acquisition, partially offset by lower incentive compensation expenses. Taxes, the income tax rate for both the 2022 and 2021 periods were above the statutory rate, which was due to foreign losses, for which no tax benefit was recognized, and state and local income taxes. Looking at our debt and liquidity, our balance sheet and liquidity continues to be very strong. At March 31 of 2022, net debt was $231.1 million. The net debt-to-EBITDA leverage ratio based on pro forma adjusted EBITDA was 2.4x, and liquidity, which includes $14.8 million of cash plus availability under the credit facilities, was $162 million. Despite continued inventory levels maintained to safeguard against supply disruptions, the funding of the S’well acquisition, and the commencement of a stock repurchase program, our liquidity continues to be very strong. This concludes our prepared comments. Operator, please open the lines for questions.

Our first questions come from Linda Bolton-Weiser with D.A. Davidson. Please proceed with your question.

Hello. How are you doing?

We are doing fine, and hopefully you are.

Yes. Thank you. So, I forgot if you said – I mean, you mentioned the shift of some revenue due to the timing of planogram changes. Did you actually quantify the magnitude of that shift or can you do so for us?

We heard the question; it was a little fuzzy, you talked about the timing of the planogram shift?

Yes. Can you quantify the amount of revenue?

Not offhand, but most of the major retailers in the U.S. in response to ongoing supply chain issues made the decision to postpone the planogram resets from the first quarter to the second quarter. And the good news, bad news is that if – on the bad news side, anything new we have won on a planogram, we are not shipping yet. And the good news is we have significant market shares, it continues, right. But when the planogram resets do aid in volume at the time of the reset, and that was just postponed this year from Q1 to Q2.

Okay. And then can you like – I think you mentioned there about the Amazon channel, the pure-play e-commerce retailers that actually improved somewhat in April, I think you said. So, would that be because the demand trends improved or because they were just now replenishing inventory, or can you give more color around that improvement?

Yes. So, in general, Amazon might just release their earnings and you saw the decline. We have seen, including last year, the pace of growth in 2021 was higher in brick-and-mortar than it was in e-commerce 2021. And a lot of factors, but some of that is people just wanted to go back to shopping in person in 2020 when obviously there was a big increase in e-commerce revenues across the world. Two factors that impacted we believe are shipments into that channel. Noticeably, in the first quarter, there was a softening demand, and so across categories, not uniformly, but we saw that as the categories just dipped, so the whole boats went down a little bit. But also, particularly in Amazon, the warehouses and their distribution centers were clogged and, therefore, there was a disconnect between selling and sell-through, right, if you are selling what would be called one piece on a wholesale basis. And there was a lag in most of our categories between what the sell-through was and the replenishment of those inventory positions at the e-commerce retailers, particularly Amazon. We have seen that it’s been the biggest impact in April, where we have seen the order flow pick up a lot, which makes sense because they are now under inventory in many cases, or skews, because of what I just described.

Okay. Thank you. And then, so your gross margin was certainly impressive. I guess one of the items you mentioned was the tariff benefit that you received. So, is that something that will recur, or can you say if you expect gross margin to continue to increase year-over-year, because it was so impressive in the first quarter?

Yes. On the tariff issue, maybe I get wrong, I will correct. So, there has been removal of certain tariffs. Now, you never know, but it’s not like there is a plan to put them back, right. So, we stopped paying those tariffs, and that’s a positive. And again, I am not predicting ongoing trade wars and the like, but it’s not like the current administration has put tariffs on and off, which was actually not uncommon in the prior administration. So, that should be a permanent benefit, so to speak. But if you look at our margin, there is so much noise. To begin with, you know as we have transformed the business starting in 2018, really more impactful in ’19, we have changed mix, and that continues to benefit because we are selling products and categories where we make more margin, and that’s just a permanent positive. And we have done a lot of that. So, it’s not like today there is a big transformation which is going to change our margin profile for ’23 and ’24, except from the growth initiatives, such as Mikasa Hospitality just off to the high margin basis. Mix makes a difference. The channel and product category mix makes a difference. And you see that one of the big impacts this quarter and we changed the margin profile purposely by what we sell dramatically in our international business. But probably the biggest impact for this quarter is that our lowest margin sales of any international market is in Australia and New Zealand, and that was down a lot. So, that helped. So, again, there is a lot of noise, but we continue to focus. And again, our gross margin percentage will remain strong. We are in a highly inflationary environment.

Okay. And just to remind me, I mean, Mikasa Hospitality, that’s a little bit of a lower gross margin business, is that correct?

No, that is incorrect. It is a higher gross margin business. In that business, there is a tremendous amount of program costs. So, our contribution margin is very strong at the high end of what we do, but the gross margins, because it doesn’t factor all the program costs in, are among the highest of what we sell.

Okay. Got it. And then just in a broader sense, we are hearing from all kinds of companies different things about even in the U.S. consumer demand softening a bit. Are you kind of sensing that, or what are you kind of seeing from the big mass retailers? What are you thinking in terms of the consumer demand trend?

Yes, that’s probably, like, we posted numbers versus ’19, right. That was the last, sort of, pure, without noise year, and it was a strong year, right. For us, ’20 was a good year, and ’21 as well. We have seen a softening in demand. And we factor that into our guidance. But the demand levels still remain as I said in my remarks, very high historically, right. So, we do see it softening versus ’21 slightly, but greatly ahead of ’19 and ’20.

Okay. Thank you so much. I appreciate it.

No problem. Thank you.

Thank you.

Thank you. Our next questions come from the line of Anthony Lebiedzinski with Sidoti. Please proceed with your question.

Yes. Good morning and thank you for taking the questions. Hope, you guys are doing well. So, just wanted to follow-up on the last question from Linda, as far as the softening of demand, are there any specific product categories that stand out? If you guys could give a little bit more detail as far as what you are seeing there in terms of the different product categories and the demand levels?

Not necessarily a little more in dinnerware and tabletop in general, partly because those are very heavy and are cumbersome from a shipping perspective. So, both freight-in and freight-out has a much bigger impact. And therefore, to maintain your margin profile, the price increases have been substantial and have had some impact on the end market, at least preliminarily. But we are not a startup and you always like to use the example of can openers, right. We sell about 7.5 million can openers, manual can openers per year, we are by far the largest player. And we are selling those can openers at $5.99 or $7.99. It’s proved historically, very, very inelastic. And it’s not very impactful. That’s probably true, the average ticket we sell is $10 and under. The company has done very well in challenging economic times. And hey, we don’t know, and we are not saying here, that the company, the world economies on the precipice of a recession, but many people are talking about that, particularly in Europe, which could pull the whole thing is. We do well in those environments. But the shipping impacts definitely have an impact on tabletop because of the weight and other challenges of shipping that product around the globe and to the consumer.

Got it. Okay. Thank you for that additional color on that. And in terms of your inventory increase, obviously, I know you guys have brought in more inventory because of all this supply chain noise and everything. But just wondering, how much of the inventory increase is actually because of higher pricing. I don’t need an exact number, but just kind of ballpark estimate, if you guys could provide some additional color.

Yes. Anthony, we estimate that there is approximately $20 million of added value to our inventory due to the ocean freight containers. Additionally, this quarter includes a portion of inventory related to the S’well acquisition. If you exclude that from the calculations, you can observe the actual increase.

Including the price increase, though, there is about an extra $65 million worth of inventory that we are carrying. That in a normalized environment, we just convert to cash.

Got it. Okay. And then in terms of the lockdowns in China, have those had– I know you guys do source a lot from China, but I don’t know if it’s more or less from Shanghai, or has that really been a material impact to your business thus far?

Definitely from a challenge perspective, so our Chinese headquarters and most of our people in Shanghai. But we have been able to manage through it effectively. But when they shutdown a port, you really have to scramble. So, yes, it is something we monitor closely, but it’s one of many factors going on in the world right now. And we have been able to mitigate. And by the way, carrying those inventory levels have dramatically helped us to mitigate that. And it’s given us an opportunity, but we are shipping things continuously, and some people we compete against are not.

Okay. That’s good to hear. And in terms of the seasonality of the business, so I mean, obviously, you talked about that a little bit, how that has been impacting you guys. So, as we look to update our models, I know there are lots of puts and takes. I know you had some delayed planogram recess, which should help out the Q2, but there is some moderation in demand. So, I mean broadly speaking, I mean, will Q2 kind of, you think looks similar to Q1 or just kind of directionally, if you could just kind of help us understand, help us out as far as updating the models, that would be great.

We anticipate 2021 looking more like a normal year 2022, actually I am to say. 2021 was an aberration for the reasons we have discussed in the past. So, the first quarter and second quarter were higher than normal than what the seasonality would dictate.

Okay. That’s helpful color. And I know you guys did buy back some shares in the quarter. Can you just remind us how many shares you bought back and how much you have left on your buyback authorization?

Yes. We only bought back – we just got started in the quarter, about $600,000 worth of stock, about $12, $13 per share. So, we have 19 plus million technically that remains.

Okay. Thank you and best of luck going forward.

Thanks, Anthony.

Thank you. There are no further questions at this time. I would like to hand the call back over to Rob Kay for any closing comments.

Thanks, Sheryl. Once again, thank you for your interest and your support of Lifetime Brands. We will be speaking at a conference next week. For those on the call, I look forward to seeing you. And Larry and I always remain available for investor queries, and we look forward to speaking to everyone next quarter. Have a good day.

Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.