Lifetime Brands, Inc. Q3 FY2025 earnings call

• Tariff situation: Third quarter saw normalization but still choppy with tariff fluctuations, new 232 tariffs on steel, and 10% tariff reduction on China imports; Lifetime had favorable cost basis from China before latest reduction and anticipates further improvement. - Market trends: Overall end market demand evolving with K-shaped economy, monitoring to optimize footprint; wary of slight down trend for holiday season but expect some large customers' shipments to rebound in Q4. - Supply chain: Took actions like expanding sourcing in Mexico and SE Asia, implementing pricing actions, tightening cost controls; tariff mitigation strategy in place, flexible supply chain to pivot as conditions evolve, diverse geographic footprint established. - Project Concord: Approaching finish line on major initiatives, will evaluate after year-end for next phase. - International segment: Showed progress with strategic shift to major retailers in Australia, NZ, Europe; tariffs disruptive with some segments having deferred shipments, but multipronged pricing strategy to offset cost impact. - M&A strategy: Ongoing progress, benefiting from higher deal flow as pressured competitors look for partnerships/sales. - Innovation: Launching new products aligning with trends, e.g., Dolly line, Build-A-Board collection, S'well glass bottle line; reaffirming ability to identify trends early and bring to market at scale. - Financial position: Liquidity solid at $51 million, adjusted EBITDA $47.2 million over trailing 12 months, allowing selective investments for long-term profitability and shareholder value.

Consolidated sales declined by 6.5% to $171.9 million. U.S. segment sales decreased by 7.1% to $158.1 million, favorably impacted by planned price increases to offset higher tariffs but offset by dampened consumer demand and order timing shifts, particularly in tableware. International segment sales increased by 1.5% to $13.8 million, excluding foreign exchange translation, a decrease of 2.7% predominantly in Europe but partially offset by higher sales in Asia Pacific. Consolidated gross margin decreased to 35.1% from 36.7%, with U.S. segment gross margin decreasing to 35.1% from 36.8% due to higher selling prices to offset tariffs, and International gross margin increasing to 35.5% from 34.6% due to favorable customer and product mix. U.S. segment distribution expenses as % of goods shipped decreased to 8.5% from 10.1% due to improved labor management efficiencies, partially offset by higher software expenses. International segment distribution expense as % of goods shipped improved to 22.6% from 24.2% due to lower freight out expenses and higher shipment volume. Selling, general and administrative expenses decreased by 8.5% to $35.5 million, with U.S. SG&A decreasing by $1.5 million to $28.4 million (percentage of net sales increased to 18% from 17.6% due to fixed costs on lower sales), International SG&A decreasing by $1.1 million to $3.4 million (percentage of net sales improved to 24.6% from 33.1% due to lower employee and selling expenses), and unallocated corporate expense decreased to $3.7 million from $4.3 million. Interest expense decreased due to lower average outstanding borrowings and interest rates. Liquidity was $51 million and adjusted EBITDA for trailing 12 months ended September 30 was $47.2 million.

• Anticipate current macroeconomic and end market environment to persist until global trade environment stabilizes, expecting return to normalcy with customer base and end markets. - Expect shipments to 2 of 3 largest customers to rebound in Q4 due to order shift from Q3 to Q4. - 2026 and beyond expect groundwork laid in 2025 to translate into stronger performance, greater efficiency and renewed growth momentum as broader market stabilizes, with current headwinds driving disruption for undercapitalized competitors creating opportunities for Lifetime.

• Current tariff landscape creates near-term volatility. - Macro-economic backdrop and end market environment with K-shaped economy bring uncertainty. - Some peers struggling to adapt with slow pricing actions, lack of diversified manufacturing infrastructure and system capabilities to manage complex customs, cost and pricing environment, which may lead to them not being able to sustain current operations.

Q: Is there any way to quantify the magnitude of the revenue shift for a couple of large customers?

A: Not at this time.

Q: Thinking about pricing versus unit volumes, can you give more info about pricing and fourth quarter pricing related to tariffs?

A: Price increase approximately offset additional tariffs as planned, a couple of percentage points impact, still phased in, will have additional impact in Q4, and refers to both Section 232 and other tariffs.

Q: Can you give a sense of product sourcing nowadays, especially related to China?

A: Production has fluctuated, shifted to India then back to China due to infrastructure issues, currently economics favorable with China including tariffs, can flex production but 80% out of China won't be by year-end as it would harm economics, and factories in SE Asia overlap ownership with China factories for easy shifting.

Q: What types of M&A opportunities are being looked at and what about valuation multiples?

A: Actively engaged in own space with high synergies, seeing reduction in valuation, combination of market valuations being down and opportunities with meaningful synergies and cost eliminations leveraging multiples down further