Good morning, ladies and gentlemen, and welcome to the Lifetime Brands' Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, I would like to inform all participants that their lines will be in a listen-only mode. After the speakers' remarks, there will be a question and answer portion of the call. I would now like to introduce your host for today's conference, T.J. O'Sullivan. Mr. O'Sullivan, you may begin.

Thank you. Good morning, and thank you for joining Lifetime Brands' Fourth Quarter and Full Year 2023 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 other factors 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 contain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Included in the press release is a reconciliation of these non-GAAP financial measures with 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, T.J. Good morning, everyone, and thank you for joining us today. We had a strong fourth quarter, delivering results that helped us to meet or exceed net sales, income from operations, and adjusted EBITDA targets from the revised full-year guidance metrics we provided last quarter, as well as analyst estimates. We are pleased with the strong net sales growth we are driving across categories, especially in our ecommerce channels, which continues to gain share. When coupled with our continued focus on driving efficiencies across the business, this outperformance translated to meaningful operating income growth that we expect will continue in 2024. To start, I’d like to walk you through our fourth quarter and full-year results at a high level. In the fourth quarter, we delivered $203.1 million in net sales and $21.5 million in adjusted EBITDA compared to $207 million in net sales and $19.7 million in adjusted EBITDA in the prior year period. For the full year, we generated $57.3 million in adjusted EBITDA compared to $58.2 million in 2022, coming in ahead of our internal estimates, thanks to diligent expense management and a focus on incremental revenue opportunities throughout the year. Of note, our performance was notwithstanding $3.6 million of one-time charges in 2023. We have been encouraged by the improving supply chain environment in recent quarters and experienced no disruptions in the fourth quarter. Though we are monitoring potential issues stemming from ongoing geopolitical challenges in the Red Sea, which have had some initial impact on ocean freight costs and shipping times. Further, with another quarter of normalized shipment and ordering activities now behind us, we believe that the oversupply issues our retailers experienced coming out of the pandemic have dissipated. Turning now to our international business. Throughout 2023, we remained diligent in the execution of our international turnaround strategy and we are pleased with the meaningful progress we have made, including market share gains in these end-markets. In Australia and New Zealand, the direct go-to-market strategy we implemented earlier this year is translating to increased listings with additional accounts, products, and brand listings. Additionally, we continue to drive incremental revenue opportunities as we roll out new product lines into our international markets driven by our highly successful KitchenAid offering. As a result of these factors, in the fourth quarter, we saw the first turnaround in year-over-year international revenues since 2021. As part of our international turnaround plan, we took a non-cash inventory write-off in the fourth quarter, which impacted our bottom-line performance, but we expect that the aforementioned initiatives will have a meaningful impact on our international channel’s bottom-line in 2024. In our Food Service business, we remain on track to achieve significant growth in 2024 as Mikasa Hospitality continues to gain traction and capitalize on the market position achieved in 2023. While this business is still in its early stages, we are confident that Lifetime is now recognized as an important participant in the food service industry and will continue to expand its product placement across North America. We maintain our long-term view that we can grow our total food service business to $60 million in revenues by 2026. Refining and building out our ecommerce strategy remains a key strategic priority for Lifetime. This quarter, ecommerce net sales exceeded 23% of our total net sales for the quarter, contributing meaningfully to our overall outperformance. This represents an increase of nearly 3.5% from the comparable quarter a year ago when our ecommerce net sales were slightly below 20%. We are continuing to hone our online strategy to ensure we are best positioned to capitalize on the significant opportunities we see in the channel. We maintain a strong focus on new product development and channel expansion to bolster our market position. Looking ahead, we are excited about our robust new product pipeline, many of which are incremental revenue opportunities. Production of our previously announced Dolly Parton-branded products is well underway, with shipments on track to begin in April and the majority of products slated for the second half of the year. This launch is across four different product categories all in the Dollar channel, which is a new channel for Lifetime. We are also reinvigorating our robust pipeline of 12 products with new items being launched in the first quarter of 2024. These will initially be available online on swell.com as well as across ecommerce channels. In line with our commitment to reduce our exposure to supply chain issues in China, we continue to ramp up production capacity in our Mexico facility. With the facility now operational and on track to reach full capacity in 2024, and combined with other sourcing initiatives, we are well on our way to meeting our previously stated target of approximately 25% of our spend on goods being outside of China by the end of the year. Active balance sheet management remains a priority for us and we are pleased with our financial position as we enter 2024. Our disciplined cash management throughout 2023 led to a noticeable improvement in working capital year-over-year in both our US and international businesses, which Larry will discuss in further detail shortly. We remain prudent in our approach to capital allocation and are open-minded to value-enhancing M&A opportunities that align with our strategic priorities. We will continue to evaluate opportunities as they arise, especially in the current market, which favors strategic buyers. In summary, we are pleased with the strong momentum across our business as we close out 2023. The significant work we have done over the past several years to transform and reposition our business is paying off and we are entering 2024 as a more focused and agile company. Looking ahead, we are excited by the meaningful work already underway across our organization to continue growing market share and generating significant 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 fourth quarter of 2023 was $2.7 million or $0.13 per diluted share versus $3.3 million or $0.15 per diluted share in the fourth quarter of 2022. Adjusted net income was $6.3 million for the fourth quarter of '2023 or $0.29 per diluted share as compared to $7.5 million or $0.35 per diluted share in 2022. Income from operations was $15.7 million for the fourth quarter of '23 as compared to $12.8 million in the 2022 period. Adjusted income from operations for the fourth quarter of '23 was $19.4 million compared to $18.2 million in the 2022 period. And adjusted EBITDA for the full year of 2023 was $57.3 million. Adjusted net income, adjusted income from operations, and adjusted EBITDA are non-GAAP financial measures, which are reconciled to our GAAP financial measures in the earnings release. The following comments are for the fourth quarter of 2023 and 2022 unless stated otherwise. Consolidated sales declined by 1.9%. U.S. segment sales decreased by 4% to $185.2 million. The decrease occurred in the tableware and home solutions categories. Tableware was lower as most of its warehouse programs shipped during the first nine months of the year, and home solutions declined due to lower hydrated products in the corporate sales channel. The decrease was partially offset by strong sales in the kitchenware category. International segment sales increased by $3.8 million or $2.9 million in constant U.S. dollars to $17.9 million. As Rob discussed, in the fourth quarter, international had its first upturn in sales since the fourth quarter of 2021. The increase was attributable to higher ecommerce sales and market share gains from the launch of the go-to-market strategy and an increase in Asia sales too. Gross margin increased to 36.4% from 34.9%. U.S. segment gross margin increased to 37.2% from 35.8%. The improvement is due to lower inbound freight rates and favorable product mix. For international, gross margin decreased to 27.2% from 37.1%, most notably from reserves to certain slow-moving inventory. U.S. segment distribution expenses as a percentage of goods shipped from its warehouses, excluding the warehouse redesign expenses, were 8.7% versus 9.2%. The improvement was attributable to the significant reduction in inventory, which limited the need for outsized storage, and improved operating efficiency. In addition, better safety experience, lower insurance costs, and abating inflations reduced some other expenses such as freight costs. These reductions more than offset the cost of higher labor rates. International segment distribution expenses as a percentage of goods shipped from its warehouses were 19.1% versus 19.6%. The improvement was due to lower outbound freight rates and more shipments from the Netherlands warehouse. Selling, general, and administrative expenses decreased by 4.1% to $38.7 million. U.S. segment expenses decreased by $3.2 million to $29.1 million, and as a percentage of net sales, expenses decreased to 15.7% from 16.7%. The decrease was attributable to lower allowances for bad debt and a decrease in acquisition-related contingent consideration. International SG&A expenses increased by $700,000 to $4.5 million. As a percentage of net sales, expenses decreased to 25% from 26.7% due to the effect of period expenses on higher sales volume. Unallocated corporate expenses increased by $0.8 million to $5.1 million. The prior year reflected an expense reduction for performance stock awards not expected to be earned. Interest expense, excluding a mark-to-market adjustment for swaps, increased by $0.5 million due to higher interest rates on our variable rate debt, substantially offset by lower average borrowings. The loss of extinguishment of debt was for the write-off of unamortized term loan fees into a loan amendment. For income taxes, in both Q4 2023 and 2022, the rate exceeded the statutory rate primarily due to state and local tax expenses, non-deductible expenses, and firm losses for which no benefit is recorded. And related to our 24.7% equity interest in Grupo Vasconia, we reported our proportional share of its losses. Grupo Vasconia is a passive investment for us. Finally, turning to our balance sheet. In November, we amended and expanded our term loan. We now have no debt maturities until August 2027. In connection with this term loan amendment and expansion, we repaid $48.7 million of principal, and as a reminder, in June of '23, we repaid $47.2 million of principal too. Notwithstanding this $97 million reduction of permanent debt, our balance sheet continues to be very strong with $134 million of liquidity. Liquidity includes cash, plus availability under our credit facility and receivable purchase agreements. Our adjusted EBITDA to net debt ratio as of year-end was 3.4 times, a considerable improvement from 4.0 times at year-end 2022. This concludes our prepared comments. Operator, please open the line for questions.

And our first question comes from Anthony Lebiedzinski with Sidoti & Company. Please state your question.

Good morning and thank you for taking the questions. So, the first…

Hey Anthony. Thanks.

First – hi good morning. So, yeah, first just a quick follow-up in terms of the fourth quarter sales. So, I know on your last conference call in November, you guys talked about a timing shift for shipments to a certain large warehouse club customer. So was the US segment sales hurt– was that the primary reason why your segment sales were down from a year ago was because of this timing shift or is there anything else that happened there?

Yes. The fourth quarter came in above our revised guidance range. If you look at on a year-over-year basis, there was a club program which didn’t repeat and that’s driving year-over-year performance. The outperformance versus our revised upward guidance that we issued last quarter was not related to the club channel.

Okay. Got you. Thanks for the clarification, Rob, so. And then, to just – to follow-up in regards to the overall ecommerce strategy so, you mentioned that it was 23% of your sales in the fourth quarter. Do you have that number for the full year? And then, as you look forward, did you guys have a goal in mind in terms of how high you want to get this to? And just wondering about the margin profile for that channel versus others.

Yeah, Anthony, let me start and then Larry will give you the particulars. By the way, 23.2% I believe this quarter. So, we do not have a target number in mind. Our sales philosophy is to sell wherever the consumer is and to maximize those opportunities. So, we did reorient in terms of how we stand in our approach which is why we’ve been successful across all channels, growing our share in each channel. So, we tweaked that a little bit about 6 to 8 months ago and it is paying off nicely for us in gaining market share. So we are trying to maximize the pie in every channel for us. But there is no specific target and part of that is based upon the overall market and again where the consumer is spending, right? So, if the consumer spends 50% of their dollars in the ecommerce channel, we want to be at least 50%, right? So that will drive a bit more than what we are experiencing now, which isn’t being driven by a shift in the quarter or last six months really towards ecommerce in the total market, it’s more just Lifetime’s approach to that channel which has been giving us enhanced success. Larry, you want to give the full number – full year now.

For the full year, ecommerce sales increased, 2022 it was 18.7% of sales and ’23 full year was 19.3%.

Got you. So thanks for that. Okay, perfect. And then, so as far as the margin profile for ecommerce versus others, is that comparable?

Yes, sorry, I forgot to answer that. Yes. Yeah again, it is comparable but there are different channels which have different dynamics; as we talked about the club channel which is a very healthy and good channel for us, does usually run at a lower gross margin.

Understood.

It does have working capital benefits but again it’s all priced accordingly. But in general, yes, the answer to your question is yes.

Got you. Okay. So I know you are not yet providing guidance. I know typically you do that in May. But as far as, just if you could – wondering if you guys could provide some additional color. So as you have your conversations with your top customers, what are you hearing from them in regards to overall demand as far as retail traffic or online traffic, just as but what can you share with us as we try to recalibrate our models here after the results.

Yes, so the market seems to be stable and retailers are definitely more comfortable. There is less discounting than you see when they are having trouble so there isn’t a discounting that we are seeing in the market. There is healthy dialogue. The industry’s big show happens next week, look no more after that. But we are comfortable with the conversations we are having, we don’t see there being a downward discussion.

Got you. Okay. And then last question before I turn it to others. So, you did a nice job with improving your cash flows. It looks like healthy inventory levels as well. As we look forward, do you think you can further reduce inventories? I know there are some quarterly variations obviously, but I mean, as far as just when you look at managing inventories, do you think there is some further improvements that you can make? Or you think this is kind of like that the bulk of that has already been realized?

Yeah, Anthony, again just backing up a second. Lifetime’s financial profile is a very strong free cash flow. So we generate very good free cash flow and we have a very strong balance sheet. In a lot of the macro-driven challenges over the last couple of years, including trade issues, ocean freight issues, availability, and COVID-related, we made a decision as we were very public about to invest heavily in inventory and we used that to help gain market share which we’ve retained and by investing in more higher inventory levels. In 2022/23 when the market wasn’t as robust, we in an orderly basis because as we said this was always good inventory, we reduced those inventory levels and again we point out that our margin maintained or grew. So it wasn’t like we were dumping inventory and it wasn’t excess, it was just an investment and we monetized that that helped us, as Larry mentioned, it helps us be in a position to repay almost $100 million of term loan in 2023. So, just in general, it’s very strong. Do we have an ability to further reduce inventory levels from where they are today? We do in our international markets, more so in the US. With the one caveat that the trade retailers in general have relied more which has been beneficial to us, but relied more on vendors for replenishment inventory and less in their own distribution centers near because they are smart and they can push that down to strong people like us. In very robust economic times that shifts where they want quicker turns into their stores, that’s we are not in that environment now, in a high growth environment. So that always helps us in terms of inventory turns, because it’s not in our DCs, it’s in theirs. But the big numbers we’ve taken off of our balance sheet in the US, there is still room internationally.

Understood. Well, thank you very much for all that color and best of luck going forward.

Thanks, Anthony.

Our next question comes from Brian McNamara with Canaccord Genuity. Please state your question.

Hey. Good morning. Thanks for taking the question, guys. So, Rob, in November, you mentioned that you did not expect much of a rebound in the US end markets in either Q4 or 2024 as visibility remains pretty poor. I am curious if that view has changed at all relative to four months ago.

Tough to answer that, Brian. Yeah, a little bit, I mean, first starting with Q4, we exceeded, right, we have revised our guidance upwards and we exceeded everyone’s expectations, including our own. So the market performed stronger than what we expected positive in terms of our expectations fairly on top of our business. It did better than we expected and that’s good obviously. So, we are still getting the data points we are particularly this year, as we launch a whole new channel and a new line. This is big market share pickup. So that’s not end-market delivery results. We will get results from that by our newness incremental. There is a little better clarity. But I think that we are still in a market where there are still unknowns in terms of general economy, less so in North America than internationally. But there is an absolute clarity of what we see in normal condition.

That’s helpful. It’s nice to hear the new product launches for S'well in Q1. I guess, I am curious your views on the hydration segment overall given the recent Stanley craze and how you intend to position the brand in the market with competitive intensity ramping here?

Yes, Stanley has been a phenomenon and has gained tremendously. As the whole category has grown driven primarily by Stanley and one other participant, which is not particularly well received at Walmart. They have been driving that category. Still, a very big category in S’well’s catalog was needed additional investment from when we bought it, and we have done that. And while it’s really a phenomenal brand with great equity from a product development perspective, we inherited zero pipeline and we reinvigorated that. And you can see just by going on swell.com or one of the ecommerce channels at our pureplay guys, you will start to see our products. So, but, Stanley, everyone including us has had entrants into these keeping very high graded with very really big bubbles, right, which is what Stanley is. And look, it’s done a phenomenal job. So we are increasing our advertising because Stanley as a good example has done a tremendous job in social media. We need to get the story out; it’s a great brand. We need to reemphasize the story that people already know, particularly with Swell, but also Bell. Bell has major participation in hydration. So we are spending more to reinforce our brand equity. We reinvigorated both at Swell product development; you will see go online and you will already see and continue to see that come to market, which we are very enthusiastic about.

Great. That’s helpful. I know you are not providing obviously fiscal guidance until May. But is it reasonable to expect top-line growth this year?

Yeah. I mean, wait till May. But one thing, just mathematically to look at is, we are doing a major launch into a channel with Dollar General that has 20,000 stores, okay? They’ll have 23,000 very shortly. We are going to be in every one of those. So, that’s going to have an impact. Part of that won’t be into ’25, but a decent amount will be in ’24.

Okay. If that’s not quite well since your Q3 earnings, I am curious what should get investors excited for 2024 and moving forward? And then I am done. Thanks and appreciate you taking all the questions.

No problem. So, as you know, Brian and other people, management and our key shareholders that are on the Board own a lot of this company. We are very committed with our own money in terms of stake in the company and we are very pleased with the run-up of the stock this year. We still think it’s tremendously undervalued and just the math, and everyone can vote with their own dollars. So, we are pleased. We think there is just where we are today is and particularly relatively so, there is undervalue if you look at the cash flow that we generate and just the math. But we’ve been turning around our international business that’s got huge potential, that’s huge opportunity there which we start to see some traction. Mikasa Hospitality, yeah, as we grew the business from when we launched the business, changed management in 2018, we put something together. We streamlined the operation, but we also launched our food service initiative in Mikasa Hospitality and that takes time, COVID laid that, but we’ve, as we’ve talked about, gained real traction in 2023, we’ll see real results in 2024 and beyond in particular. That business is really an annuity business; once you are specked on, you are selling that same product for years. So that will ramp up, and that’s something that we have talked about being excited about. We see that now to net gain and remain very, very excited. There have been some bumps. We haven’t lost any market share. But there have been some bumps in 2022. After COVID, the company is very streamlined and as we continue to grow, a lot of that falls disproportionately, which is a positive to the bottom-line. Very excited about that. We talked – we don’t overemphasize in terms of the M&A opportunities, but strategically have an advantage for the first time in 20 years and have bought dozens of companies. So we are cautiously optimistic that will translate into opportunities for us. Frankly, if we wanted to be much more aggressive, we’d be buying a lot more businesses today. But we will maintain a very strict financial discipline, and but we think the opportunity isn’t hopefully will be able to transact it takes to and we are not going to sacrifice our discipline to do that. So there are many different levers that excite us and hopefully excite the public in terms of the ability to continue to create equity value with the cash flow that we generate even as we did not grow, and of course with all these levers we think there is ample opportunity for nice growth above the market.

Okay. Thank you.

Thank you, Brian.

Thank you. And there are no further questions at this time. I’ll hand the floor back to management for closing remarks.

Thank you, operator. Thank you everyone for attending our call. We look forward to issuing our full-year guidance as is our custom with our next call. Larry and I remain open for anyone who has questions or comments or want to discuss any aspect with us in the interim. Thank you very much and have a great day.

This concludes today's call. All parties may disconnect. Have a good day.