Transcript: Lifetime Brands Q2 2026 Earnings Conference Call

Lifetime Brands (NASDAQ: LCUT ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This content is powered APIs. 9%.

The company is using the tariff refund to mitigate inflation, restore previous spending cuts, and deleverage by repaying $40 million of term debt, with plans to refinance existing debt. Lifetime Brands reaffirmed its full-year net sales guidance of $650 to $700 million and raised its earnings and adjusted EBITDA guidance due to the tariff refund. Operational challenges at the new Hagerstown distribution center affected Q2 results, but the company expects it to be fully operational by Q4 2026. International operations narrowed losses with improved sales, and the company's Project Concorde is on track, aiming for break-even in 2026.

Full Transcript OPERATOR Good morning, ladies and gentlemen, and welcome to the Lifetime Brands second quarter 2026 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 today, there will be a question-and-answer portion of the call. If you would like to ask a question during this time, please press the star key followed by one on your telephone keypad.

Please note that this conference today is being recorded. I would now like to turn the conference over to Jamie Kirchen. Mr. Kirchen, you may now go ahead.

Jamie Kirchen, Investor Relations Good morning, and thank you for joining Lifetime Brands' second quarter 2026 earnings call. With us today from management are Robert 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 of the company. Included, 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. Any 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 development. 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 the comparable financial measures calculated in accordance with GAAP. With that introduction, I'd like to turn the call over to Robert Kay. Please, go ahead, Rob.

Robert Kay, Chief Executive Officer Thank you, and good morning. We are pleased with our performance during the second quarter, which showed year-over-year growth. As expected, the increase in gross margin and our bottom line was meaningfully driven by a benefit recognized from IEEPA tariff refunds. 6 million, despite some timing delays on a few programs which shifted revenues from these programs into the third and fourth quarter.

1 million of tariffs we paid in 2025. Larry is going to walk through the numbers in detail, but I wanted to spend a few minutes up front on that refund: what it is, how it's accounted for, and what we're doing with it, and then get into how the underlying business performed. 7 million and believed we were legally entitled to a refund. But there was still a path to travel, including the possibility of an appeal.

That path has now largely played out. 1 million of tariff refunds and, to date, have received approximately $36 million in cash. The accounting is straightforward. We paid the tariffs in 2025 and they ran through cost of goods sold.

So, accordingly, the refund runs through cost of goods sold as well, which is reflected in our results for the second quarter. 9% this quarter and why you're seeing such strong growth in operating income and EBITDA. I want to be straightforward about what we're doing with that money. First, we'll be paying taxes on it.

Second, this income will be used to mitigate inflationary pressures that are being experienced in the economy and we are seeing flow through to Lifetime. We are also using this cash inflow to restore reductions in the business that we pulled back in 2025 to protect our bottom line against the tariff impact. We've already begun restored spending levels for growth and product investment back since the beginning of 2026. And finally, we're using it to strengthen our balance sheet, particularly through deleveraging.

The tariffs meant we were carrying meaningfully more inventory value. We paid duties before we ever sold the goods, and we had to shift production across our supply base to other geographies to manage the exposure. The tariff refund, combined with the cash flow the business is generating organically, lets us pay that borrowing back down. Since the end of the first quarter, we've repaid $40 million of term debt, $20 million in the second quarter, and another $20 million in early July, funded by a combination of operating cash flow and the tariff refund.

Separately, we're in the process of refinancing our outstanding debt, which includes the company's existing line of credit and its Term Loan B facility. As part of that, we expect to improve the mix and tenor of our debt, and expect a reduction in our ongoing annualized interest expense on the underlying business. We beat last year's second quarter by nearly $10 million in net sales, though it was a relatively easy comparison. A year ago, right after the initial tariff actions, including the 145% rate on China and elevated rates across many other countries, resulted in us largely stopping shipping during that quarter.

Against that backdrop, the 2026 second quarter was in line with our expectations. End markets remained soft across the majority of consumer durable categories, and some shipments shifted as the second quarter into the third and fourth, driven both by market conditions and internal challenges related to our new Hagerstown, Maryland distribution center, of which I will elaborate more shortly. Growth was led by our warehouse club programs and e-commerce. Setting the refund aside, gross margin in the underlying business also reflects mix.

We added meaningful club channel volume this year that carries a lower margin than our average and additionally, as we have previously discussed in the impact of tariffs and our pricing mitigation strategy, this has led to lower gross margin percentages as we focused on maintaining gross margin dollars. Today we are maintaining our full-year net sales guidance as issued at $650 to $700 million. We're raising our earnings and adjusted EBITDA guidance to reflect the tariff refund, offset by the cost of the additional investments I referenced above, which is also factoring in inflationary and other impacts related to increased investment.

That's not a change to our organic outlook for the underlying business. We continue to watch the ongoing impact of geopolitical conditions and inflation, including higher ocean freight costs, on our end markets for the rest of the year, and we built a degree of caution into our guidance as a result. On new product, our newly redesigned Farberware kitchen tool line relaunched in the second quarter and early sell-through has been very encouraging. We started this program about a year ago as a refresh to our very popular and successful product line, with a redesigned look while holding competitive price points on shelf.

We also extended our Dolly Parton license for another three years, a good reflection of how that partnership continues to perform for us. International continues to narrow its losses. Sales were up and year-to-date losses were meaningfully lower than the same period last year, with most of that improvement coming in the second quarter. Project Concorde remains on plan.

We're implementing the final cost actions now, and we're actively evaluating options around the UK facility that could further improve this segment's performance. We remain on track for International to reach break even on a pro forma basis in 2026. The Hagerstown DC is online. As we've discussed before, bringing up a facility of this scale comes with startup costs and operational disruption, and that had a negative impact on the second quarter as efficiencies started out low and shipments were adversely impacted.

We expect a continued smaller impact in the third quarter as we finish the ramp, and we expect to be fully operational by the fourth quarter. At this point, we believe that our full-year guidance as presented captured these incremental one-time costs. If operational disruptions continue, one-time startup costs could exceed our previously disclosed estimates. As we have previously announced, we look forward to presenting our longer-term strategy at our Investor Day this December, which we will be providing more details on shortly.

1 million tariff refund. We're using that money to pay the associated taxes, restore reductions we pulled back in 2025, and strengthen our balance sheet, including $40 million of term debt paid down since the end of the first quarter. We're reaffirming our net sales guidance, raising our earnings guidance to reflect the refund, and staying focused on the fundamentals: getting Hagerstown to full operation, Project Concorde and International's path to break even, and continued momentum from our core lines, including Farberware, and from our license portfolio. With that, let me turn it over to Larry to go through the financials in more detail.

Larry Winoker, Chief Financial Officer Thanks, Rob. 83 per diluted share, in '25. 12 per share, in '25. 2 million in the '25 period.

1 million. S. segment. 9 million in the '25 period.

2 million. 5 million in the aggregate. Adjusted EBITDA for the trailing twelve-month period ended June 30, '26 was $92 million. The adjusted information noted are non-GAAP financial measures, which are reconciled to our GAAP financial measures in the earnings release.

Following comments are for 2Q26 and '25 unless stated otherwise. S. 2 million. Sales increased in all product categories, driven by warehouse clubs and, to a lesser extent, e-commerce.

4 million. K. 6%. S.

1%. 1 million in the current period, partially offset by unfavorable product mix. 5%, driven by favorable customer mix. S.

0%. The increase was attributable to labor inefficiencies primarily due to the move of our East Coast distribution operation from New Jersey to Maryland. 2 million, which related to one-time expenses to start up the Maryland distribution facility, including relocation of inventory, recruiting and training expenses, setup costs, and lease expenses for the non-operational portion of the New Jersey and Maryland facilities. 8%.

Improvement was due to operational efficiencies in the export regions. S. 2 million. 7%.

The decrease as a percentage was attributable to the impact of fixed costs on higher sales volume. 7 million. 4%. This decreased percentage was due to the impact of fixed costs on higher sales volume.

3 million. The increase was attributable to due diligence expenses. 8 million to close the manufacturing operation in Mexico. 9 million due to lower average outstanding borrowings and lower interest rates on outstanding debt.

5%, respectively. These rates differed from the federal statutory income tax rate of 21% primarily due to the impact of non-deductible expenses in '26 and a partial valuation allowance recorded on deferred taxes related to the goodwill impairment in '25. Turning to our balance sheet, it continues to strengthen. Our net debt declined by approximately $10 million for the current quarter and approximately $39 million since year-end '25.

At quarter-end, our liquidity was approximately $151 million, which includes cash, availability under our credit facility, and our receivable purchase agreement. 4 million has been received to date. Our current net debt is approximately $121 million. We are now in the final stage of extending our revolving credit facility and refinancing our term loan, which, if consummated, will extend all our debt maturities to 2031.

5 to $93 million. This concludes our prepared comments. Operator, please open the line for questions. OPERATOR Thank you.

We will now be conducting a question-and-answer session. If you would like to ask a question, please press star-one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star-two if you'd like to remove your question from the queue.

For participants using a speakerphone, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. And today's first question comes from Matt Koranda with Roth Capital. Please go ahead.

Matt Koranda, Analyst at Roth Capital Hey guys, thanks. I guess you're raising the EBITDA guide by $37 million at the midpoint. I guess the tariff refund was roughly $40 million. Is the delta there, I guess, the reinvestment that you were talking about in the prepared remarks, or maybe just to unpack that for us if you could.

And then it sounds like maybe there's a little bit more left to receive for the rest of the year. Will that be recognized through the P&L, or maybe just a little bit of help on sort of how it flows through? Robert Kay, Chief Executive Officer Yeah, so you got it exactly right.