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DATE

Wednesday, Nov. 5, 2025, at 4:30 p.m. ET

CALL PARTICIPANTS

  • President and Chief Executive Officer — Scott Tidey
  • Senior Vice President and Chief Financial Officer — Sally Cunningham
  • Vice President, Investor Relations — Brendan Frey

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RISKS

  • Gross margin declined to 21.1% in Q3 2025, primarily due to a one-time $5 million incremental tariff cost and temporary lag between cost inflation and pricing actions, which management expects to normalize but identified explicitly as a constraint on profitability.
  • Net cash used for operating activities was $14.6 million for the nine months ended September 30, 2025, compared with net cash provided of $35.2 million for the nine months ended September 30, 2024, reflecting materially lower sales volume and payments related to new supply chain terms under the China diversification strategy.
  • Total revenue fell 15.2% in Q3 2025, mainly driven by softer U.S. consumer demand and delayed orders from a key retailer, leading to lower volumes across core segments.
  • Net debt rose to $32.8 million from $22.5 million at the end of the prior year period, paralleling reduced cash flow for the nine months ended September 30, 2025, compared to the prior year. and increased working capital tied to supply chain adjustments.

TAKEAWAYS

  • Total Revenue -- $132.8 million, down 15.2% from the third quarter last year, with the sales decline primarily attributed to lower U.S. Consumer sales and delayed retailer orders.
  • Year-over-Year Sales Trend Improvement -- Year-over-year revenue decline improved by 300 basis points compared to Q2 2025's year-over-year rate, indicating partial demand stabilization post-tariffs.
  • Gross Profit -- $28 million, representing 21.1% of revenue, down from $43.9 million and 28% in Q3 2024, affected by a $5 million one-time tariff hit.
  • Adjusted Gross Margin (Ex-Tariffs) -- Would have been $33 million or 24.8% of revenue, showing the temporary nature of the tariff compression.
  • Operating Profit -- $2.9 million, or 2.2% margin, with one-time tariff costs outweighing prior expense leverage.
  • Adjusted Operating Profit (Ex-Tariffs) -- Would have reached $7.9 million, or 5.9% of revenue, highlighting the impact of non-recurring costs.
  • Selling, General, and Administrative Expenses -- $25.1 million, $8.2 million lower than the prior year compared to $33.3 million in the third quarter of 2024, mainly from reduced personnel costs and restructuring benefits.
  • Net Income -- $1.7 million, or $0.12 per diluted share, compared with $1.9 million, or $0.14 per diluted share, a year ago, demonstrating continued profitability despite one-off headwinds.
  • Commercial Segment Results -- Cited as "outstanding," with inventory constraints limiting greater performance and new product launches, including the Sunkist commercial line.
  • Product Pipeline and New Launches -- Robust introductions planned, including premium Lotus, Qi, and Clorox-branded products, with Lotus initial sell-through "exceeding expectations by strong double digits."
  • Manufacturing Diversification -- Accelerated shift away from China to Asian countries, aiming for a more nimble sourcing structure in response to tariff uncertainty.
  • Cost Management -- $10 million in annualized organizational savings initiated, with measurable benefits emerging in the reported quarter.
  • Retail Customer Order Flow -- After significant pauses, major retailer ordering normalized during the quarter, with upcoming promotional activity expected to support further stabilization.
  • Share Repurchase and Dividend -- Repurchased 39,000 shares for $600,000 and paid $1.6 million in dividends.

SUMMARY

Hamilton Beach (HBB 4.52%) management reported that gross margin compression was chiefly due to a singular $5 million tariff spike incurred on containers “on the water” during elevated rates. When excluding this temporary cost it points to more normalized profitability levels, with the company positioned for margin recovery as new product launches and manufacturing diversification initiatives progress. Executives emphasized that the core supply chain realignment and the restoration of normal order flows at a major retail partner collectively set the stage for an anticipated recovery in both top-line and profitability in the upcoming quarter. The surge in net debt and reversal in operating cash flow for the nine months ended Sept. 30, 2025, were both linked to the China sourcing transition, but are paired with concrete expectations for near-term stabilization due to completed actions and retailer inventory normalization.

  • Management stated, "we have fully absorbed the impact on gross margins from the peak tariff rate and have moved forward with a more balanced inventory position and a clear line of sight on returning gross margins more in line with historical levels."
  • A broad product rollout, a greater focus on the premium segment, and digital initiatives in commercial and health verticals are specifically intended to capture market share as category demand recovers.
  • Tidey explained that improved trade relations and a moderated tariff backdrop give "greater clarity into our cost and pricing architecture" and underpin guidance for sequential margin and revenue improvement.
  • Opportunistic repurchasing and dividend maintenance amid transitory pressures underscore management’s confidence in long-term value creation post-tariff normalization.

INDUSTRY GLOSSARY

  • Sell-through: The rate at which a product is sold to the end customer, as opposed to being shipped to retailers, used here regarding initial Lotus brand performance.
  • Sectionizer: A commercial kitchen appliance that segments or slices fruit, highlighted in Sunkist branded product results.
  • SmartSharp system: A proprietary digital health platform mentioned in relation to the company's patient subscription base growth and digital improvements.

Full Conference Call Transcript

Scott Tidey: Thank you, Brendan, and good afternoon, everyone. Thank you for joining us today. Our third quarter performance represents a step in the right direction towards normalization following the significant disruption our industry faced after higher tariffs were implemented in April. As the third quarter progressed, retailers started to resume more typical buying patterns after destocking inventory purchases, evident in the sequential improvement in our year-over-year sales trend compared with the second quarter. While profitability declined more meaningfully than revenue in Q3, this was driven primarily by a one-time incremental tariff cost of $5 million and, to a lesser extent, a timing mismatch between ongoing tariff rate increases and our pricing adjustments.

This significant headwind was partially offset by a favorable mix shift led by increased penetration of our higher-margin commercial and health businesses. Importantly, we have fully absorbed the impact on gross margins from the peak tariff rate and have moved forward with a more balanced inventory position and a clear line of sight on returning gross margins more in line with historical levels. This will be achieved over the coming quarters through the strategic actions we've taken in response to higher tariffs. To review, we meaningfully accelerated our manufacturing diversification efforts away from China to other APAC countries and remain nimble as multiple trade negotiations played out and agreements are finalized.

With a more diversified geographical sourcing structure, we have the ability to quickly shift our procurement to markets that are in the best economic interest of the business. We took decisive pricing actions, implementing increases in June and August that align with the current tariff rate increases. Our retail partners have been understanding and accepting necessary price adjustments, which were carefully balanced to maintain our competitive market position while protecting margins. Our strong brand equity and market leadership have enabled us to take these necessary steps while maintaining our value proposition to consumers.

And we enacted comprehensive cost management measures across the organization that generated $10 million in annualized savings, with the benefit of these actions starting to materialize in the third quarter. Looking at the performance highlights by business division, our core business continued to expand its reach as we shift our kitchen collections by Hamilton Beach line to a leading mass market retailer nationwide. This broader rollout increases our already significant retail presence and reinforces our market-leading position across the small appliance space. Looking ahead, our robust pipeline of new products and high-growth categories like blender kitchen systems, specialty coffee, and air fryer should position us for further market share gains.

Our premium business continues to perform well, highlighted by the successful launch of our high-end Lotus brand. Initial sell-through results have exceeded expectations by strong double digits, which is remarkable for a new premium line, especially as the majority of our initial advertising support for Lotus is planned for November and December. Based on this performance, we are actively negotiating to increase shelf space, positioning LOTUS for even broader market reach. Beyond Lotus, we also have new innovative launches planned across our Qi and Clorox brand partnerships in the coming quarters that should help fuel further growth. Our commercial business delivered outstanding results in the third quarter.

In fact, we believe inventory constraints limited our performance, which speaks to the strong and growing underlying demand for our innovative commercial solutions. Our recent Sunkist brand launch continues to be a resounding success, with branded commercial juicers and sectionizers continuing to deliver outsized results. Looking ahead, we are focused on accelerating our commercial business expansion through new channel penetration and expansion of our relationships with large food and hospitality chains. Furthermore, we are diversifying our manufacturing base for our commercial line to make sure we are positioned to fully capture the growing market opportunity ahead.

We are seeing new partnership deals develop, including a new specialty pharmacy partnership with CenterWell and Lumicera, both of which are top 15 specialty pharmacies in the U.S., with strong interest for expansion into other markets. Beyond these product advancements, the team has also recently implemented several digital improvements resulting in a smoother patient experience, lower patient acquisition cost, and higher conversion rates. These new developments, along with expanding our patient subscription base by 50% this year and the conditions treated using our SmartSharp system, leave us very excited about Health Beacon's future. We exceeded our point of sale expectations during one of the largest digital retail events of the year.

Looking ahead, we're placing a large emphasis on digital growth in Q4 to capitalize on the important holiday shopping season. In closing, we have greater clarity into our cost and pricing architecture now that tariff rates on certain Chinese imports have moderated significantly from the peaks reached in the second quarter and trade relations have improved. While uncertainty in the marketplace remains, we expect the strength of our brand portfolio, recent sourcing diversification efforts, and pricing actions will lead to further top-line and margin recovery in the fourth quarter. With that, I'll turn it over to Sally.

Sally Cunningham: Great. Thank you, Scott, and good afternoon, everyone. As Scott detailed, our third quarter sales trend improved compared with the second quarter. And while gross margins were down year over year, the pressure was largely temporary. And the impact from the peak tariff rate on China is now fully behind us. Turning to our results, starting with revenue. Total revenue in the third quarter was $132.8 million, down 15.2% from last year's third quarter, but up 300 basis points compared with the second quarter's year-over-year. The revenue decline was primarily driven by lower volumes in our U.S.

Consumer business, reflecting overall softness in consumer demand, as well as timing of retailer purchases, specifically one large retailer that delayed orders for most of the third quarter. As a reminder, some retailers paused buying in the second quarter to assess inventory levels and price increases flowing from the new tariffs implemented by the United States in April 2025. Most retailers resumed buying in the second quarter, the pause negatively affected volumes during the early part of the third quarter. Turning to gross profit and margin. Gross profit was $28 million or 21.1% of total revenue in the third quarter, compared to $43.9 million or 28% in the year-ago period.

The decline in gross profit margins was primarily due to the flow of one-time incremental tariffs that were in effect for a period of time earlier this year. Additionally, gross margin was impacted by a delay between tariff-related rising costs and the effective date of pricing adjustments. This created a temporary compression of gross profit margin that we expect to normalize in future periods. It is important to note that excluding the $5 million of 125% one-time tariff cost, gross margin would have been $33 million or 24.8% of total revenue. Selling, general, and administrative expenses decreased $8.2 million to $25.1 million or 18.9% of total revenue compared to $33.3 million or 21.2% of total revenue in 2024.

The decrease was primarily driven by $6.8 million of lower personnel costs, including reduced stock-based compensation expense due to changes in our stock price year over year, as well as benefits associated with the restructuring actions we took in the second quarter. Operating profit was $2.9 million or 2.2% of total revenue compared to $10.6 million or 0.8% of total revenue in 2024. As the temporary impact on gross margins from the peak tariff rate more than offset the expense leverage we delivered in the third quarter. Excluding the $5 million 105% one-time tariff cost, operating profit would have been $7.9 million or 5.9%. Income before taxes was $2 million compared to $2.7 million.

The prior year period included a one-time non-cash charge of $7.6 million related to the termination of the company's overfunded pension plan. Income tax expense was $400,000 in the third quarter compared to income tax expense of $700,000 a year ago. Net income was $1.7 million or $0.12 per diluted share compared to net income of $1.9 million or $0.14 per diluted share a year ago. Now turning to our balance sheet and cash flows. For the nine months ended 09/30/2025, net cash used for operating activities was $14.6 million compared to net cash provided of $35.2 million for the nine months ended 09/30/2024.

The decrease was primarily due to a $27.5 million change in accounts payable due to lower purchasing activity from decreased sales volume and inventory turnover, as well as shorter payment terms with new suppliers under the company's China diversification initiative. During the three months ended 09/30/2025, the company repurchased approximately 39,000 shares totaling $600,000 and paid $1.6 million in dividends. On 09/30/2025, our net debt position, or total debt minus cash and cash equivalents and highly liquid short-term investments, was $32.8 million compared to a net debt position of $22.5 million at the end of the prior year period. In closing, we are encouraged with how we have navigated the dynamic trade environment this year.

With greater clarity around the go-forward tariff rates for most all of the U.S. trade partners, the situation continues to stabilize. We anticipate that our fourth quarter results will show further progress towards improving our sales trend and gross margins. And while our continued recovery will not be linear in 2026, we expect our annual performance to benefit nicely from the actions we've taken this year, diversifying our sourcing structure and lowering our fixed cost base. This concludes our prepared remarks. We will now turn the line back to the operator for Q&A. In the interest of time, we ask that you only limit yourself to one question and a follow-up.

Again, if you would like to ask a question, press star 1 on your telephone keypad. Your first question is from the line of Adam Bradley with AJB Capital.

Adam Bradley: Thank you for the color around the margin gross margins. Can you please clarify the 370 basis point or $5 million tariff cost? Was that a charge or is how should we think about that? In the past, I believe you used FIFO accounting, and it's taken time for costs to flow through the P&L. And this seems different. What we hear you saying is that the $5 million charge was recognized in the quarter that those purchases were made. Just some clarity around that to help us understand that better.

Sally Cunningham: Okay. Sure. Hi, So the cost relates to the 125% tariff that was temporarily put in place in the April timeframe earlier this year. So you are right. These costs that were incurred in April did flow through our P&L in the third quarter. And what it really represents is some containers that we had on the water when this spike in tariff occurred that we are not able to or we made the decision to not pass on to the consumer. And so for us to absorb as a one-time cost and that flow through in its entirety in the third quarter.

And I think that's a little bit different from kind of the more go-forward increased tariffs that we're seeing from IEPA in from China and other Asian countries, which we do consider part of our go-forward kind of cost structure and that we have taken actions to cover those additional expenses.

Adam Bradley: Okay. Thank you. So the $5 million that you paid, it's not a charge on the P&L separately, it just flowed through in your cost of goods?

Sally Cunningham: Correct.

Adam Bradley: Okay.

Sally Cunningham: Thanks.

Adam Bradley: I'll hold off here and jump back in and see if someone else has the chance to ask a question.

Operator: You do have a follow-up from Adam Bradley. Can you expand a little bit on a more normalized rate from your largest retailer? Can you give us a little bit more color around that? The second quarter earnings report you shared that they had pretty, I may be paraphrasing here, but paused orders. And then it sounds like from what you are stating in this Q3 report, that they continue to pause orders. Did you lose shelf space? Are you back to normal ordering? Are you almost back? What kind of color can you give us on that to help us understand sales trends?

Scott Tidey: Yes, Adam. This is Scott. So, yes, on that customer and specifically, they, you're right, did pause placing orders. Their inventories got lower throughout that time period. But if you look now, we've been shipping them now for several months. And we feel like the business is back on track. As we indicated, we had a very robust promotional event in October and that customer was included. And we exceeded our expectations with that customer. We are really looking into the fourth quarter, we feel like we're going to be having a record number of promotional activities this fourth quarter. And that customer, along with many of our other retailers, will be part of that.

Adam Bradley: Thanks. Are you experiencing any catch-up of inventory to replace what was lost? Or is it more of a normal flow?

Scott Tidey: I think we're kind of in a normal flow right now. And we had a little bit of a catch-up. The market has been a little bit different depending on the category of lower in units but up in dollars because of price increases. But I think we're kind of back into a normalized pattern with this customer.

Adam Bradley: Okay. Great. Thank you for that. Are you seeing different behavior from other large customers? Or is it consistent with some of the larger ones?

Scott Tidey: No. I think for the most part, we feel like we're in a normal cadence with a lot of, I mean actually probably with all of our retail partners. There was definitely that time period where they stalled in the second quarter, took a hard look. Some people were sitting on higher cost inventory due to these surprising 125% tariffs. And everybody is trying to figure that out. But I think really for most of the third quarter, with the exception of this one retailer, we were shipping as normal and promoting.

Operator: At this time, there are no further audio questions. I will now hand the call back over to our speakers for any closing remarks.

Brendan Frey: Thank you, Tamika. I think that's it from the Hamilton Beach Brands. Appreciate everybody's time.

Operator: This concludes today's call. Thank you for joining. You may now disconnect your lines.