Adam Bradley

Adam Bradley from AJB Capital inquired about the second-quarter performance of the Hamilton Beach Health business, requesting specific revenue and P&L figures. He also questioned the company's capital allocation strategy, specifically its philosophy on opportunistic share buybacks during periods of market turbulence and a low stock price.

Answer

SVP, CFO & Treasurer Sally Cunningham provided the Health business results, noting Q2 revenue of $1.7 million and an operating loss of $864,000, a significant year-over-year improvement. She explained the buyback strategy is twofold: first, to offset dilution from compensation grants, a goal already met for the year, and second, to be opportunistic based on share value and the company's liquidity position, confirming a willingness to repurchase when conditions are right.

Adam Bradley from AJB Capital inquired about the Q2 performance of the Hamilton Beach Health business and sought clarity on the company's long-term capital allocation strategy, particularly concerning the philosophy and triggers for stock buybacks.

Answer

SVP, CFO & Treasurer Sally Cunningham provided the Q2 revenue ($1.7M) and operating loss ($864k) for the Health business, noting significant year-over-year improvement. She explained that the buyback strategy is twofold: first, to offset dilution from compensation grants (around 300,000 shares annually), and second, opportunistic repurchases when the stock is undervalued and the company's liquidity position allows.

Asked about the Q2 performance and specific financial figures for the Health Beacon business, and questioned the company's capital allocation strategy, particularly their philosophy on stock buybacks during periods of market turbulence.

Answer

The company provided specific Q2 revenue ($1.7M) and loss figures ($864k) for the Health business, noting significant year-over-year improvement and confirming it's on track for profitability. Regarding buybacks, they explained their two-pronged strategy: offsetting dilution from compensation and making opportunistic purchases, stating they are open to buying when shares are undervalued, provided their liquidity position is strong.

Adam Bradley asked for clarification on the gross margin outlook for 2026 amid new tariffs, the cost implications of diversifying sourcing away from China, and the response from major retailers to potential price increases. He also inquired about recent inventory pull-forwards, future reporting plans for the HealthBeacon segment, and a discrepancy in the reported share repurchase figures.

Answer

Executive Sally Cunningham stated that due to unpredictability from tariffs, the company is suspending guidance and cannot provide a specific gross margin outlook. Executive R. Tidey clarified that the expected 2026 margin benefit is tied to long-term sourcing diversification into lower-tariff countries, and the company is confident it can maintain margins through pricing actions. Tidey also noted that discussions with retailers are ongoing and collaborative, as both sides have inventory and face similar market-wide challenges. Regarding HealthBeacon, Cunningham confirmed it is a reportable segment with details in the 10-Q. She also explained the share repurchase discrepancy was due to two separate programs: a board-approved plan and repurchases for tax withholdings on incentive compensation.

Adam Bradley asked about the correlation between rising SG&A expenses and the company's significant gross margin expansion, questioning if SG&A would decrease if margins normalized. He also inquired about the sustainability of the current high gross margins and the specific product mix and strategic initiatives driving this profitability.

Answer

CFO Sally Cunningham explained that SG&A contains controllable expenses that could be adjusted if needed. She attributed the recent increase to non-cash equity compensation tied to stock appreciation, planned investments in the HealthBeacon acquisition, and spending on strategic initiatives. CEO Scott Tidey added that the gross margin improvement is sustainable and driven by a strategic focus on higher-margin premium and commercial markets, new product innovation, and the future high-margin Hamilton Beach Health business.

Adam Bradley asked about the relationship between rising SG&A costs and expanding gross margins, questioning if SG&A would normalize if margins did. He also probed the sustainability of the current high gross margins, asking for specific drivers like product mix and new initiatives.

Answer

CFO Sally Cunningham explained that while some SG&A is controllable, recent growth is driven by non-cash equity compensation, investments in the HealthBeacon acquisition, and other strategic initiatives. CEO Scott Tidey affirmed the sustainability of gross margins, attributing the strength to a strategic shift towards higher-margin premium and commercial markets, cost management, and innovative new products.