Good morning, everyone, and welcome to Lifetime Brand's Third Quarter 2024 Earnings Conference Call. I would like to inform all participants that their lines will be in a listen-only mode. I will now introduce your host for today's conference, Rory Rumore. Rory, you may begin.

Thank you. Good morning, and thank you for joining Lifetime Brand's Third Quarter 2024 earnings call. With us today from management are Rob Kay, our Chief Executive Officer, and Larry Winoker, our 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 our earnings 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 our earnings release also contain 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 with a comparable financial measure 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. On today's call, I'd like to first briefly touch on our third quarter financial results. Second, discuss the factors that contributed to the reduction in our guidance for full year 2024, the strong performance in our e-commerce channel and progress in our International and Professional Food Services Division, and touch on anticipated M&A. Fourth, provide an update on the supply chain, and lastly, I will touch on the balance sheet. For the third quarter, 2024, we delivered net sales of $183.8 million compared to $191.7 for the same period last year. Sales were largely impacted by softness in the end markets that drove slower volume at point-of-sale and contributed to de-stocking in our core U.S. business, most notably in the mass channel. Specifically with reference to Dollar General reporting a decline in their year-to-date revenues and store traffic, they've made the decision to delay the second phase of the Dolly Parton program, which had originally been slated to begin shipping in 2024 and is now planned to be shipped in the first quarter of 2025. With this pushout in shipments, we now anticipate $4 million of our previously forecast $10 million in sales from the Dollar Store to be recognized in the first quarter of 2025. At the time, we reported our second quarter results in early August. We did not have this line of sight and today issued an update to our full-year 2024 outlook to reflect this and other updates in our business. The uncertainties signaled in prior quarters have intensified with relatively weak end market conditions combined with slower restocking that has contributed to weaker than expected shipments. Additionally, while a small overall impact, the overall downturn in the food service market has resulted in fewer shipments than anticipated. While these macroeconomic headwinds were factored into our previous guidance, we did not factor in de-stocking and delayed shipments into 2025, which has had the largest impact on our outlook. Further cementing the soft third quarter, our channels experienced weakness in the seasonal back-to-school consumer demand. However, we are cautiously optimistic, expecting this holiday season to be consistent with the forecasted increases by major retailers and third-party data, which we consider when calculating our internal expectations. Factoring in these delays, we now expect full-year sales of $680 million to $700 million compared to $687 million in 2023. Despite challenges in the operating environment, we believe in the resilience of our business model is clear and we are pleased to have delivered another quarter of steady gross margins. Importantly, we experienced robust market share growth across our categories in e-commerce during the third quarter. Consolidated e-commerce sales increased to $34.4 million or 18.7% of total sales year-over-year and to $86.3 million or 18.4% of total sales for the year-to-date period. U.S. e-commerce sales reported notably strong growth with an increase of 10.7% in the third quarter year-over-year. During the third quarter of 2024, Lifetime outperformed across the majority of our categories at Amazon, reinforced by our October 2024 Prime Day sales, which increased 21% year-over-year across all categories. To put this into context, Amazon reported a 3% increase in year-over-year October Prime Day sales. Overall, our comprehensive portfolio of well-recognized brands and our targeted go-to-market approach of meeting the consumer where they shop continues to resonate and resulted in valuable market share gains. Turning to our international segment, which we understand remains under the microscope for many, sales increased 10.9% from the comparable prior year quarter. This quarter's positive sales performance is a result of the successful execution of our repurposed go-to-market strategy and reorganization within this business, again, where we continue to see market share expansion, which is solely driving this performance as the end markets remain challenging. While we recognize an operating loss in international, we have experienced higher gross margins and incremental listings with larger retailers in targeted channels, which we believe is an early indication that our turnaround strategy is working. The ability to turn the international business back to profitability is an opportunity to add an incremental $10 million in annual EBITDA compared to our performance in fiscal year 2023. This should not be discounted and is one of the key reasons behind our focus on restoring international. Overall, demand in the UK end markets remains soft and our third quarter growth was driven by our strategic shift into new markets and new channels. In particular, we've gained traction with national retailers and grocers as we shifted the legacy focus from independence, which has been a declining channel. On the European continent, we continue to gain new placements at large retailers such as Leclerc and Carrefour in France, Erika in Germany, and Marco in Denmark. As these are all placements that we generated in 2024, we expect that the bigger financial impact of these wins will be in 2025. In Asia-Pacific, we are experiencing favorable traction with the expansion of our listings in multiple brands and with expanded retailers in Australia and New Zealand. Further, we have completed the second phase of our two-step process in our infrastructure turnaround in this market and finalized the build-out of our own infrastructure. We now are in the process of establishing a fully direct APAC sales strategy, which we expect to be complete by the end of 2024. We anticipate that not only will this allow us to grow top-line, but it will be at a more profitable growth and contribution margin. Outside of the top-line growth in international, we are pleased with the incredible success of the first phase of our Dolly Parton program. The first program of four exceeded all expectations and positions Lifetime for further growth with the Dolly Parton brand and fits our original strategy with more Lifetime products and brands available at Dollar General and other retailers. With the pushout in shipments I previously mentioned, we now anticipate the incremental revenue impacts to be seen in the first quarter of 2025 and still expect this program to well exceed $10 million. Building on initial consumer momentum for the Dolly Parton brand, we are already in discussions with additional customers and channel partners for 2025 shipments and have received placement in a few accounts already. As I mentioned a few moments ago, our strategic goal with the Dolly Parton license was to first use this brand to enter the Dollar channel and penetrate across several of our product categories, including home decor, cutlery, and tabletop. As we continue this collaboration, we have an ongoing dialogue to expand our market share in this channel with additional Lifetime products and brands. In our food service business, we experienced a slight downturn this quarter, driven by a downturn in this market, which has led market participants to delay capital projects and purchasing decisions. However, we continue to gain share in this segment through national account networks and food service distributors and remain optimistic based upon the continued new listings that we've won to expect growth this year and robust growth in 2025. In late September, we expanded our Mikasa Hospitality product offering to include premium glassware brands Royal Leerdam and ONIS. This new product line will begin shipping in 2025 rather than late in the fourth quarter as previously indicated, and we expect a revenue contribution in our commercial food services division beginning in the first quarter of 2025. In terms of our M&A pipeline, we believe that the current market opportunities are strong. We continue to actively pursue numerous M&A opportunities that are currently in our pipeline and are evaluating targets in many areas, including our core business, new product adjacencies, and our food service business. We are hopeful to make meaningful progress in terms of pursuing an opportunity. However, we will not do so if it means compromising our financial discipline. Meanwhile, as we previously disclosed, we are rigorously evaluating targets in new categories such as the outdoor sector that are accretive to profitability and a catalyst to achieve our long-term performance objective at an accelerated pace. We expect to continue to advance discussion regarding these potential opportunities and will keep the market updated on all strategic initiatives. On this topic, we recorded one-time acquisition-related expenses of $0.2 million in the quarter and $0.9 million in the year-to-date period related to our due diligence in pursuit of a potential acquisition target that did not come to fruition. These one-time expenses will not impact our future financial results. The important takeaway relating to our M&A activity is that we will not sacrifice our long-term vision for the company to accept short-term goals. We believe there remains significant opportunity here. However, I can assure you we are waiting for the right opportunities. We will perform the due diligence and properly vet prior to committing or announcing potential targets that will not be suited for our business. Turning to our supply chain, while ocean freight costs have stabilized at attractive levels, we have incurred a notable but manageable increase in domestic trucking costs. In order to manage costs and overall COGS, we have sourced products at reduced costs, which have provided the ability to maintain favorable margins of approximately 37% in the quarter. Despite the brevity of the Longshoremen strike, we did experience a delay in moving goods in the region. In addition, climate conditions including the drought in the Panama Canal and U.S. hurricane events resulted in business disruption and caused delayed shipments. In Europe, the geopolitical turmoil that has caused challenges throughout 2024 continues to divert shipments out of the Red Sea, prompting a longer route to Europe. We've successfully mitigated any business interruption as far as inventory and have met customer and consumer demand. In Mexico, our plastics manufacturing facility remains unscheduled to reach full production capacity and we will begin shipping an expanded product assortment by the end of the fourth quarter of this year. We have taken a measured approach to ramp up this facility to ensure we achieve high-quality output and build an appropriate product mix being produced in this facility. This and other initiatives are helping us progress in our efforts to have approximately 25% of our spend on goods being sourced outside of China in the near term. In addition to this Mexico initiative, we remain primarily focused on southern and eastern Asia and expect to expand this initiative in 2025 with the good progress we have made to date. Our manufacturing partners in the region are working with us and setting up new facilities outside of China to accommodate this expansion in several countries. One example of this is our recent transfer of the manufacturer of our largest SKU by volume to Cambodia. I'll turn to some high-level color around our balance sheet which Larry will discuss in greater detail shortly. In preparation for any uncertainties following the outcome of the Presidential election, we have taken defensive operational measures and increased inventory levels to protect against the potential for increased tariffs post-election. In our experience, we've determined this to be a prudent operational action though this does incur utilization of cash and liquidity. This was critical to avoid a business interruption and to control retention of our market share with ample reserves through a higher inventory level as we position for increased sales volume and end market demand in 2025. Importantly, this investment was strategic and we will be able to monetize this reserve inventory at full value. Overall, we are comfortable with holding a higher level of inventory as a hedge against the material impact from potential tariffs. As noted in the second quarter, we placed certain customers on credit hold to mitigate risk based upon the headwinds at retailers which was a component of the decrease in sales from the prior year period and a contributor to the revised 2024 sales forecast. One example is Big Lots, which we had on credit hold and therefore did not ship orders that we had received over the last two quarters. They have since filed for bankruptcy and we have now begun shipping on a post-petition basis while avoiding the credit liability that existed pre-bankruptcy filing. We continue to believe this is another hedge to reduce risk that is in our control. We are comfortable with our leverage ratio and pleased with our cash generation levels despite headwinds in the environment. As we look ahead to the remainder of the year, we believe we are well-positioned to continue to grow market share and create value as we anticipate a rebound in demand in 2025. We have a strong foundation in place, thanks to the significant work completed over the past several years, which has resulted in our resilient business model, something I take great pride in. We look forward to keeping you updated on our progress as we continue expanding our leading portfolio of brands, driving innovation and delivering operational excellence. With that, I'll now turn the call over to Larry.

Thanks, Rob. As we reported last evening, net income for the third quarter of 2024 was $300,000 or $0.02 per diluted share compared to $4.2 million or $0.20 per diluted share in the third quarter of 2023. Adjusted net income was $4.5 million for the third quarter of 2024 or $0.21 per diluted share compared to $7.7 million or $0.36 per diluted share in 2023. Income from operations was $8.6 million in the third quarter of 2024 versus $13.6 million in the 2023 period. Adjusted income from operations for the third quarter of 2024 was $13.2 million compared to $17.7 million in the 2023 period. And adjusted EBITDA for the trailing 12-month period ended September 30th of 2024 was $53.9 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. Following comments over the third quarter of 2024 versus 2023, unless stated otherwise. Consolidated sales declined by 4.1% to $183.8 million. U.S. segment sales decreased 5.1% to $170.2 million. As Rob commented, sales were adversely affected by end market softness that drove slower volume at point of sale and contributed to retailers' de-stocking, including delaying programs. Within the segment, the product lines most affected by these factors were tableware, kitchen tools, and hydration. These declines were partially offset by increases in cutlery and home decor products. And while brick and mortar retail demand declined, U.S. e-commerce sales increased from 15.7% to 18.3% of total U.S. sales. International segment sales increased by 10.9%, $1.3 million, 1.1 million in constant U.S. dollars, to $13.6 million. The increase came from UK national and export accounts to continental Europe, in part driven by new placement at large retailers. Gross margin overall remained mostly steady with a slight decrease to 36.7% from 37%. U.S. segment gross margin decreased to 36.8% from 37.3%. The decline was due to product mix. An international gross margin increased to 34.6% from 32.5% driven by customer and product mix. U.S. segment distribution expenses as a percentage of goods shipped from its warehouses, excluding non-recurring expenses, were 9.1% in both periods. Increases for licensing fees for our new warehouse management system and higher labor rates were offset by lower freight expenses. For international distribution expenses as a percentage of goods shipped from its warehouses were 24.2% versus 22.4%, reflecting general inflation factors and the impact of our new direct APAC sales strategy. Selling, general and administrative expenses decreased by 3.5% to $38.8 million. In the U.S. segment, expenses decreased by $1.6 million to $30 million. As a percentage of net sales, expenses were 17.6% in both periods. The decrease was driven by lower employee costs, the largest component of SG&A, primarily due to lower incentive compensation. Other decreases included lower allowances for doubtful accounts. This is partially offset by general inflationary factors. For international, SG&A increased by $800,000 to $4.5 million and as a percentage of net sales, it increased to 33.1% from 30.1%. The increase is driven by higher employee expenses and certain regulatory expenses. Unallocated corporate expenses decreased by $600,000 to $4.3 million due to lower incentive compensation, partially offset by higher professional fees. As mentioned in our release, included in SG&A expenses was diligence-related expenses for an abandoned acquisition transaction of $300,000 and $900,000 for Q3 and the nine-month period, respectively. For interest expense, excluding mark-to-market adjustment for swaps, the increase was $600,000 due to higher interest rates on our debt, partially offset by lower average debt balances. The effective income tax rate for the quarter and prior periods differs from the federal statutory income tax rate, primarily due to foreign losses for which no tax benefit is recognized. And looking at our debt and liquidity position, our balance sheet continues to be strong. As of September 30th of this year, our liquidity was approximately $76 million, which included cash plus availability under our credit facility and receivable purchase agreement. The decrease in liquidity from the second quarter reflects seasonal peak needs for working capital, as well as higher inventory purchases to support forecasted sales for the fourth quarter, products expected to shift in the first quarter of 2025, and to mitigate some risk against potential tariff increases. As provided in our release, we updated our financial guidance for the full year of 2024, which is as follows, net sales of $680 million to $700 million, adjusted income from operations from $44 million to $47 million, adjusted net income from $11 million to $13 million, and adjusted EBITDA of $54 million to $57 million. This concludes our prepared comments. Operator, please open the line for questions.

Thank you. We will now begin the question and answer session. Your first question comes from Anthony Lebiedzinski with Sidoti & Company. Please go ahead with your question.

Good morning and thank you for taking the question. So I guess we first wanted to drill down on the 3Q sales shortfalls. So maybe if you could separate the impact of the delayed shipments for, I believe mass retail was the biggest sales that you saw the performance, but then look at that versus the Dolly Parton shipments that got delayed. So maybe if you could just kind of cross out those two and I have a couple of other questions as well.

Yes, so the big miss in the quarter, some of the timing is in the mass channel where there was just softness and the orders weren't there. The guidance was driven also because that the dollar shipments of Dolly were not in the third quarter. But there was a fair amount in the fourth quarter, as we said, well over 4 million, which is being pushed at their choice. So it'll ship in the first quarter, but it won't ship in this quarter and that helped drive the change in our guidance.

All right, that's helpful, Rob. And then in terms of the distribution expenses, they were up 17% from last year. I think Larry, you touched on a little bit, but that's a bigger spike than what you guys typically have in a quarter. So maybe if you could just drill down into some more details about that and what are your expectations going forward?

When I mentioned the percentage that was consistent with last year, I excluded two items that will not recur. One of these is a periodic assessment of assets and obligations related to our facilities. We evaluate the condition of properties when leases expire to determine any necessary restoration costs. We had a significant assessment this quarter that won't happen again. The other item is the new warehouse management system, which involves licensing rather than capital expenditures. We achieved some efficiencies during its implementation, which has been completed for our Rialto facility on the West Coast. However, I don't expect those efficiencies to continue since operations are now running smoothly. We're currently implementing the system at our New Jersey facility, benefiting from the insights gained from the West Coast experience, but we do not anticipate any unusual outcomes. To clarify, the assets and obligations involve posting both an asset and a liability, followed by asset depreciation. In our financials for the quarter, this appeared as depreciation expense, with no cash impact.

Got you. And just to follow up on that. So, in terms of just the distribution expenses, so roughly a $3 million increase on a year-over-year basis. So how much of that would you say is non-recurring of that increase?

Yes, approximately $2 million of that.

Okay. That's very helpful. Okay. And my last question before I pass it on to others. So as far as the international segments, it's definitely nice to see improved results there. What are you assuming now for this segment? So what's embedded in your new guidance now for the year in terms of your operating income or net income? However, you want to address that, but just wondering what are you factoring into the international segment now? And it sounds like you expect that to improve next year, but any thoughts on that, that'd be helpful.

Yes, we really haven't broken that out, but it's consistent with what we said in the past. So it won't make a profit this year. It will be the performance and the bottom line and top line will improve year-over-year, which is in our guidance for this year. But we'll see the bigger impact next year, which when we release that, we'll discuss.

Got it. Thank you very much for the best of luck.

Next question comes from Brian McNamara with Canaccord Genuity. Please go ahead.

Good morning. This is Madison Callinan on for Brian. Thanks for taking our questions. First, we're just curious what drives the hockey stick improvement and sales in Q4 with guidance calling for 9% growth at the midpoint? Thanks.

We see the fourth quarter as strong. There are some programs that were delayed at the retailer's request, so we expect them to shift into the fourth quarter.

Yes. Much of it is related to timing and the nature of our business. Programs can shift from one quarter to another, so for the entire year, some aspects have been pushed out. One quarter may show different results compared to the same quarter last year, but overall for the year, things have been delayed, and that’s a consistent pattern we’ve observed in our business.

Great. And then secondly, after a few lean years with tough end markets, what will it take to sustainably grow the business again long term? Any color around that? Thanks.

There's a lot of noise in the market. Consumer confidence and demand are what drive our business, similar to other consumer products. Over the past few years, we've either maintained or gained market share, even though the overall consumer market hasn't been growing. In our food service segment, we’ve seen good growth and have gained significant share. However, this market is experiencing a downturn this year due to inflation, particularly food inflation and increased dining costs, which has led people to dine out less. Consequently, the industry has not opened as many locations and has postponed capital spending decisions, like purchasing new dinnerware and glassware. That segment is currently growing at 6%, and we anticipate a return to those levels in the near future. Organizations like Circana and the NRF are predicting that pent-up demand will contribute to a strong holiday season. Additionally, any potential increase in stimulus could positively impact consumer spending, similar to what we saw with the significant stimulus in 2021. In Europe, the market is softer and we have less penetration, making it susceptible to macro issues. A cold winter could dampen demand further due to high energy costs. Nevertheless, we continue to gain market share, which is why we have achieved 11% growth this quarter. This trend should support our international performance as we are gaining share in a challenging market. Ultimately, our performance will depend on consumer confidence, the overall economic climate, and consumer spending.

Thank you very much.

Next question, Christina from D.A. Davidson, please go ahead.

Hi, it's Christina on Linda Bolton Weiser. So a clarifying question, I was wondering like for the $4 million, is there something planned for third quarter or fourth quarter that got delayed to the first quarter of '25? And maybe on the new commercial food product line, like so obviously retailers were kind of locked in to put in the order. So like, how are the retailers accepting the new commercial food product line based on the conversation that you have recently?

Yes, hi. On the first piece, I think you're asking about Dollar General. So Dollar General, excuse me, the shipment of a little over $4 million is really a 4Q to 1Q shift. It will shift. So, but the shift is from Q4 into Q1. And that had a big impact in widely revised guidance. So that's just the timing. And that program is solely at Dollar General. Dollar General had softness in public. So it's actually a good opportunity because our relationship is really strengthening with them. But as a result, they didn't move stuff into score, which they originally were going to do. And they delayed it out a quarter. It is going to shift. The program is doing extraordinarily well, as they tell us their expectations noticeably. So that program will grow meaningfully in '25, but the delay is shipping. We have the inventory sitting here. We will ship that to them already scheduled in Q4. I think the second question had to do with our food service, nothing to do with retail. So in that segment, hotels, restaurants, it's probably the industry's down, right? So in a downturn, they're delaying capital spend, which includes buying these sets again, and wearing glasses and the like. And new store openings, which drive our business, because if you need new tabletop, and for that matter, back of the house, scales and thermometers, timers. So it's just down in the industry is expected to rebound next year. But we're gaining share in there. So a lot of share that we've gained wins because of the delay, they're not shipping, but that'll ship starting in '25 with all these new wins just because they're going to have to buy stuff. And the other piece we had announced our partnership with a Dutch company to gain a very prestigious line that already has existed and been sold for years, called Royal Leerdam and ONIS, it's the same company, had two lines. And we originally had anticipated that starting to ship in Q4. Operationally, that's going to specifics operations, we're more sophisticated than they are from a logistics and operation, which includes barcoding and other packaging things. And as a result of sort of the systems need to be able to put that in place, it caused a delay in our shipping that product, which we originally hoped and anticipated to ship that product starting in Q4. Now that'll start shipping in Q1.

That concludes today's call. Thank you all for joining. You may now disconnect.

Thank you, everyone.