Good afternoon, everyone, and thank you for joining us today. I'm excited to share with you some key highlights about Hamilton Beach Brands Holding Company. Before we get started, just a reminder, including this presentation, is our Safe Harbor Statement. Please read it carefully. Hamilton Beach Brands is a prominent name in the world of small appliances. With a legacy spanning over 110 years, our company has a long history of delivering high-quality, innovative products. We are a leading designer, marketer, and distributor of a diverse range of branded small electric household appliances. We participate in mass consumer markets, as well as important side of our business being in the premium market as well. Our core consumer market is primarily in North America, including the U.S., Canada, Mexico, and Latin America. We provide commercial products globally to restaurants, fast food chains, and hotels.
More recently, we've become a provider of connected devices and software aimed at healthcare management, and reflecting our commitment to innovation and improving lives. We became public in 2017, and our stock trades on the New York Stock Exchange. We generate annual revenue of approximately $650 million, and we sell between 25 and 30 million units annually, which underscores our significant market presence and customer trust. We are dedicated to profitable growth while also focusing on reducing capital and debt, ensuring a healthy financial foundation and continued success. Let me review the key highlights that we believe make our company a compelling investment opportunity. First and foremost, we are a leader in the large and growing consumer housewares market. In 2023, the North American market, including U.S., Canada, and Mexico, totaled approximately $10.5 billion.
Our strength lies in our powerful portfolio of iconic brands, which are well-recognized and trusted by consumers worldwide. Second, innovation is the core of our success. With our industry-leading research and development, we have a long history of introducing innovative products that solve consumer pain points. Next, we have established strong relationships with key customers across all markets and channels, including the industry-leading e-commerce presence. Fourth, we are executing six strategic initiatives designed to drive revenue growth and expand our margin over time. Fifth, our asset-light model is a key strength, allowing us to generate healthy free cash flow. Six, we follow a disciplined capital allocation strategy, which includes reinvesting in the business and returning value to shareholders. And finally, we have an experienced management team to execute against our strategic initiatives. We have a powerful brand portfolio.
Our portfolio is anchored by our two flagship brands, Hamilton Beach and Proctor Silex, both of which are household names. These brands have been trusted by consumers for well over a hundred years, symbolizing our long-standing commitment to quality and innovation. Our core business has laid a solid foundation, allowing us to consistently support and invest in new growth initiatives, including premium, commercial, and health and wellness. We have secured exclusive multi-year trademark licensing and other agreements with an increasing number of premium consumer brands. These agreements not only elevate our portfolio, but also allow us to offer products at higher prices and margins, reflecting the premium nature of these brands. Our portfolio is diverse, offering a good, better, best product assortment that caters to a wide range of consumer goods.
We offer a broad product assortment and participate in more than fifty categories, demonstrating our ability to meet a wide range of consumer needs. Our Hamilton Beach brand holds a top three position in twenty-six key categories in the U.S. This ranking underscores the strategic strength and recognition of our brand across a broad spectrum of product offerings. We participate in high-demand categories such as single-serve coffee, blenders, toasters, ovens, and grills. These are areas where consumers' interest is strong and our products are well-positioned to capture significant market share. At Hamilton Beach, our good thinking approach drives our commitment to consumer-driven innovation. This philosophy focuses on understanding consumer needs and finding innovative solutions that make their lives easier. We gather data and feedback from over twenty-five thousand consumer touchpoints every year. In the last five years alone, we've launched over two hundred new product platforms.
This consistent pipeline of new products is a testament to our dedication to staying ahead of the market trends and consumer expectations. Our goal with every new product is to maximize innovation by offering unique consumer benefits. We strive to develop products that not only meet but exceed the needs of the consumers, creating lasting value. Our innovation pipeline is robust and supports all markets in which we participate. As a result of our innovation efforts, Hamilton Beach grew both dollar and unit share in North America in twenty twenty-three and throughout the first half of twenty twenty-four. On this slide, you can get an example of just some of the new products that we'll be launching in twenty twenty-four.
I would point out in the upper left-hand corner, these three espresso machines up there, this has been one of the trending categories in the marketplace, and so we felt like there's a need and an opportunity to put a few more products in this space at different price points. But also another trending area has been air fryers added to, air fryer feature being added to toaster ovens. And so down on the bottom right, you can see three ovens that all have air frying capabilities, meeting the consumer's needs to be able to do both toasting, baking, broiling, and air frying. Building and maintaining best-in-class customer relationships is a cornerstone of our business strategy. Our success is deeply rooted in the strong partnerships we have cultivated across the industry. Our products are distributed through all key channels, ensuring broad market reach and accessibility.
This includes mass retail, e-commerce, department stores, and direct-to-consumer channels, allowing us to meet the consumer wherever they choose to shop. Our commercial relationships are global, with a strong focus on large restaurant and hospitality chains, offering high-quality, customized products to meet the menu's needs. In a brief time, we have also developed deep relationships with large specialty pharmacies and pharmaceutical companies. In summary, our best-in-class customer relationships, supported by broad distribution across all key channels, plays a critical role in our ongoing success and market leadership. Our six strategic growth initiatives are key to our long-term success. These are: drive our core business, gain share in the premium market, lead in global commercial market, accelerate growth in Hamilton Beach Health, accelerate digital transformation, and leverage partnerships and acquisitions. I'm going to briefly cover the first four and turn it over to Sally.
Our first initiative is focused on driving core growth, a critical area where we are already leading in the market. Hamilton Beach is the number one small kitchen appliance brand in the U.S. by units sold, a position we intend to strengthen even further. In addition to Hamilton Beach, our Proctor Silex brand plays a key role in our growth strategy. Proctor Silex is known for being simply better, offering products with sleek, practical designs and accessible price points, making quality more attainable for a broader audience. Our growth plans center around innovative new product development for our core brands. In twenty twenty-four, we have an exciting lineup of new products launches across high-demand categories. These include coffee makers, air fryers, toaster ovens, blenders, food processors, hand and stand mixers, slow cookers, garment care, and many more.
To support these new products, we are increasing our investment in digital and social media and influencer marketing. In summary, by driving core growth through market-leading products, brand positioning, and enabling market efforts, we are poised to drive success in the largest part of our business. Our second initiative focuses on gaining a larger share in the premium market, an area where we see substantial growth potential. Some of the premium brands we offer, such as Weston and Hamilton Beach Professional, are owned outright, while others are available to us through exclusive multi-year trademark licensing agreements. In 2023, our share of the U.S. premium market, which totaled $3.6 million, was about 3%. In 2023, sales of premium products accounted for about 15% of our total revenue, illustrating this initiative is already a key contributor to our business.
Our growth strategy in this includes introducing new and innovative brands. For example, in twenty twenty-four, we are launching new milk machines, which are allowing consumers to create fresh, plant-based milks on demand and an exciting addition to our premium lineup. This aligns with the consumer trends towards healthier, sustainable options and positions us to meet the growing demand in this category. In summary, by expanding our presence in the premium market through brand partnerships and innovative product offerings, we are well positioned to significantly grow our market share and increase our revenue in this high-potential market. On this slide are a few of our premium products. Starting on the left, our new milk plant-based machine, then our Clorox air purifier, in the middle, our Bartesian Duet, our Brita Hub water filtration countertop appliance, and then also our CHI garment steamer.
Our third initiative aims at leading in the global commercial market, a multi-billion-dollar opportunity with significant growth potential. This market represents a key area where we see substantial upside, especially as we expand our footprint internationally. We are investing in higher-margin products designed for use in the commercial food service and beverage operations, as well as for hotel amenities, mostly in-room applications. Commercial markets offer strong profit potential, and our initiative aligns with the increasing demand for durable, high-performance equipment. In 2023, our sales of commercial products accounted for 8% of our total revenue. Our growth strategy includes several key components. First, we're driving product innovation that meet the unique needs of our commercial customers. Second, we're increasing sales with our existing customers and by adding new ones.
And then third, we're leveraging our partnerships with companies like Bartesian and New Milk to expand our reach and influence in the global commercial market. This aligns with the current consumer trends. This aligns with consumer trends of towards healthier, sustainable options and puts us in meeting this need. In summary, growth plans are focused on regional and global chains. We're investing in blending and mixing technologies. Our Summit Edge line offers best-in-class performance for blending, while our Shaver blenders offer large batch blending solutions. Enhancing back-of-the-house food preparation is also critical. We are implementing new systems and equipment like these Big Rig immersion blenders to streamline the food prep market and be able to give us back-of-the-house access in the space.
Internationally, we see Europe, the Middle East, Africa, and India as presenting significant growth opportunities. We are focusing on increasing our market share and expanding our footprint in these diverse and dynamic geographic locations. As in the consumer market, we are introducing New Milk commercial as a key product offering. Coffee shops are a prime target due to their high volume of beverage sales and increasing demand, where we see New Milk can play. Our fourth strategic initiative is accelerating growth of Hamilton Beach Health. Our Hamilton Beach Health brand was created in 2021 as part of our commitment to expanding into the healthcare sector. This move positions us to address increasing healthcare needs with innovative solutions. In 2024, we acquired HealthBeacon PLC, a leading medical technology firm.
This acquisition enhances our capabilities in healthcare management and provides a robust platform for growth. The opportunity for growth is driven by several factors: demographic shifts and aging populations, rising rates of chronic medical conditions, increasing demand for at-home treatment solutions, and advances in technology that enable remote monitoring management. We're developing cutting-edge healthcare management tools, including remote therapeutic monitoring devices. Our first system, the Smart Sharps Bin, is designed for safe disposal of sharps and is primarily distributed through specialty pharmacies. Our revenue model is subscription-based, offering high margins and recurring income. The model ensures a steady revenue stream and aligns with our goals for long-term growth and sustainability. To accelerate growth, we have several key strategic strategies: adding new patients through both existing and new pharmacy customers, expanding the range of conditions treated by our current...
conditions treated using our current system to meet broader patient needs, and continuously improving and innovating our healthcare management tools to stay ahead in the market. Through acquisitions and innovative solutions and targeted growth plans, we aim to make substantial difference in the healthcare management. And now I'll turn it over to Sally to discuss our next two strategic initiatives.
Great. Thank you, Scott. Our next initiative is to accelerate our digital transformation. Our e-commerce capability is well-developed, and we have capitalized on the consumer shift to online shopping. In 2023, 48% of our U.S. consumer sales were through the e-commerce channel. Our brands have best-in-class retailer support, driving prominent brand placement on leading sites. Our brands receive strong online consumer reviews and ratings, which builds brand equity. The average star rating for our brands is 4.4. Five of our brands receive 4.5 stars or higher. Our future growth plans include online content investments to drive awareness and sell-through via online advertising and other digital marketing strategies. Our sixth and final strategic initiative is to leverage partnerships and acquisitions. Our approach to partnerships and acquisitions is disciplined.
We seek businesses that fit strategically within our portfolio and leverage our strengths. We prioritize opportunities that will provide entry into consumer or commercial markets, where we can become strong participants. We have entered partnerships with the Bartesian brand and more recently, the New Milk brand, both of which have created new markets for consumer and commercial product applications. We believe both of these opportunities have strong growth potential. We have entered into trademark licensing agreements with Clorox and Brita, entering the air purifier and water filtration markets, where we believe there is significant upside, and as you heard Scott talk about, earlier this year, we acquired HealthBeacon, a medical technology business that leverages our legacy strengths in small appliances, engineering, and distribution. This acquisition gives us a foothold in the home health market, which is experiencing very fast growth.
As the overall population ages, and as advances in technology provide significant opportunities for new solutions for at-home care. Moving forward, we plan to continue to actively pursue strategic alliances, licensing agreements, and acquisitions that would drive growth in all of our markets. This brings us to our financial summary for the twelve months ending June thirtieth, 2024, as well as calendar years 2023 and 2022. During the global supply chain challenges, we maintained a strong focus, agility, and resilience while continuing to make strategic investments in our business. Our approach has allowed us to come out the other side with increasing profitability and a strong balance sheet. Looking at our income statement, we are pleased with our top line and bottom line P&L growth over the last few years, and we are trending above historic profitability.
For the full calendar year 2024, we expect a modest increase in revenue and a significant increase in operating profit, driven by gross profit margin expansion. Looking at our balance sheet and cash flow, our focus on working capital management, along with our asset-light model, generated $150 million of outsized free cash flow over the last 18 months. Our capital allocation strategy is disciplined and focused on returning value to shareholders and investing in the growth of our business. Over the last few years, we have allocated much of our free cash flow to significantly reduce debt. We return value to shareholders through stock dividends and stock buybacks. Sorry, cash dividends and stock buybacks. Additionally, we use the cash to fund our HealthBeacon acquisition. On the following pages, I'll discuss our revenue growth roadmap, key margin drivers, and balance sheet and liquidity in more detail.
Turning to our revenue growth roadmap, we believe that our future revenue growth will be driven by the six strategic initiatives that we've reviewed today. While we plan to continue to invest in the core business, we believe that the fastest-growing initiatives will be premium through new and innovative brands, commercial through higher margin products and expanding partnerships, and health by adding new patients and customers and expanding the range of conditions treated using our system. Focusing on calendar year 2024, the small kitchen appliance market is projected to be modestly below 2023. But as I mentioned on the previous slide, we expect our revenue to outpace the market and increase modestly over 2023, reflecting continued progress in our strategic initiatives. Key margin drivers. We are intently focused on expanding our gross profit margin and our operating profit margin.
We believe that a key driver for gross profit margin expansion will come from the continued shift in our mix to premium, commercial, and health brands, which generate higher margins than our core brands. The key driver to operating profit margin expansion is expected to be through rigorous expense management, as well as SG&A leverage as the business scales. For the calendar year twenty twenty-four, as I've reported, our operating profit is to increase significantly as a result of our gross profit expansion. One of our key strengths is that our global infrastructure footprint supports our asset-light business model. We outsource manufacturing primarily to China, and we are diversifying that supplier base within Asia. We have staffed our own engineering and quality teams in Asia to work closely with our manufacturing partners.
This ensures that we optimize the low CapEx requirements of an asset-light business model while maintaining our high standards of quality. This model provides significant free cash flow for reinvestment into the company. We strive to maintain a strong balance sheet and ample liquidity to support investments. Over the last 18 months during the pandemic recovery, we have allocated our outsized cash flow to pay down $75 million of pandemic-related debt. As of June 30th, 2024, our leverage ratio is 1.0x, and we have ample liquidity to support our growth investments, and as we make future investments, our goal is to maintain a conservative leverage ratio of 2.5 to 3x.
So the combination of our strategic initiatives to drive revenue growth and margin expansion with our stable balance sheet and asset-light, low CapEx model, is expected to provide normalized free cash flow of $25 million-$35 million per year. Our priority uses of cash are to focus on reinvesting in our business and to return value to shareholders. Reinvestments in our business support both organic growth and a disciplined M&A strategy, which is focused on synergistic bolt-on opportunities. We return value to shareholders in two ways. First, through our competitive quarterly dividends, which have returned $6.2 million to shareholders over the last 12 months. And second, through our share buyback program that seeks to opportunistically repurchase stock, while at a minimum, offsetting dilution.
So in conclusion, let me reiterate Scott's comments on why we believe our company is a compelling investment opportunity. First and foremost, we are a leader in the large and growing consumer housewares market, with a powerful portfolio of iconic, trusted brands. We are a proven innovator, with over a hundred and ten years of experience in leading R&D. We have established strong relationships with key customers across all markets and channels, and we have an industry-leading e-commerce presence. We are executing the six strategic initiatives that we reviewed today that are designed to drive revenue growth and expand our margins over time. Our asset-light business model allows us to generate healthy free cash flow. We follow a disciplined capital allocation strategy of reinvesting in the business and returning value to shareholders. And finally, our experienced management team is executing successfully against our strategic initiatives. So thank you.
We'll open the floor to questions. Yes.
You talked about strong free cash flow.
The last couple of years have been extremely well above net income or income. Do you expect sustainability of that, or is that kind of a one-time thing into the future?
Okay. There are, like, three signs telling me to repeat the question. So the question was, we've had outsized free cash flow over the last couple of years, and do we expect that to be maintained, right? Or is it more normalized over time? You know, I do think the last couple of years was outsized. I just through the pandemic recovery, I think, our normalized free cash flow over the next couple of years will be in that $25-$35 million per year range. Yes, sir.
Do you worry about the possibility of tariffs?
Yes. The question is, do we worry about the possibility of tariffs? Do you want to start with that one? I mean, I think within our industry, most of the appliances are produced in China, so if tariffs apply to us, tariffs are going to apply to everybody and this happened four or five years ago, and you saw this lump, right, where we had to increase prices and pass it on to the consumer, and then come back down, so I think it's just part of the business. I think there's also somewhat unknown what's going to happen politically, but I do think that we're probably on the front end of diversifying out of China, kind of the China Plus One strategy.
And so we've already taken steps with our current suppliers in China to open facilities in Thailand, Vietnam, and where we have the ability to move our tooling from China to those secondary facilities. And so we're pushing our suppliers. They're pulling as well, but I think that's our diversification, and we're probably a little bit ahead of some of our competition in that. Yes.
How are you all doing sort of consumer education? Like, you know, I think if the average consumer went to buy a toaster air fryer, and they knew that that brand also owns Wolf-
That may really sway them towards taking that air fryer as opposed to...
Yeah.
How do you do that? I mean, I don't think most people know-
Yep.
-the brand.
This one's you.
How do you...
Right. I mean, fair point. So you're right. So let me repeat the question. So how do we, you know, how do we continue to educate the consumer about the brands and our ability to be able to make high-performing products and value, you know, based products? I will tell you, you know, from trying to reach the consumer, we're trying to reach them, you know, by the brand proposition, and so we're trying to find out, you know, how are they going to market. So in some cases, that's from an education standpoint, from an online perspective. In other cases, with the younger generation, you know, we might get very focused around social media, digital applications, trying to reach that consumer and trying to push them towards a brand.
I think it's very hard as a Hamilton Beach Brands Holding Company to talk about how, you know, educate them that not only is Hamilton Beach making Hamilton Beach product, as you've indicated, but also Wolf Gourmet. That's a harder message to convey. So we try to stay very, very focused on the brand promise and who that consumer is in that price point and get targeted against them. Any other questions? Yes, sir.
Yes, another question. Your company is very prolific in product development, many of the products you have. You also talked about the mix shift to premium and healthcare. Can you talk about the environment for your product development, whether it's just yourself or what, how you create some of your products then?
Right. Right. So, the question was, is our company is very diverse between our product portfolio. We've got a number of new partnerships. And areas like health, where we're getting into, how do we keep up with the product development in this category? So, you know, again, for many years, Hamilton Beach has been, you know, delivering forty-five to fifty-five new product platforms. And so as we continue to support our product initiatives, you know, we look at each one of those partnerships or whether it be our core brands, and how do we want to support those? Where are the gaps? What do we need to, you know, what are the gaps? What are the trends in that space, and what is that product development needed?
So you take some things like health from that perspective, you know, we kind of bought into that product development, right? That product already existed, but they didn't really know how to get it to market and be able to distribute it. So in that case, you know, it was coming in, partnering with them, and then we eventually acquired them because it was a great opportunity. In other cases, though, you know, as you look at, like, a partnership with Clorox, we see that we need to expand the line, right? So we might be in small, medium, large air purifiers, and then we want to do an extra large purifier. Or it might be that we've just recently launched a humidification and a sanitization appliance under that.
So amongst that product development that we do 45-55 a year, you know, we're kind of going through and picking the most important areas to support our core and all of our brand partners. Any other questions? Yes.
With all your overseas development, how do you compete with your labor costs?
Yeah. So, the question was, you know, with all the products, you know, that our overhead and our labor around that, you know, must be pretty consistent. So, you know, we really feel like the best way to leverage our business model is to drive that top-line growth and improve our profit margins. Because to your point, we're able to keep a fairly stable labor and SG&A within our organization. You know, we've got a large team of engineers and industrial designers and, you know, certainly a lot of support services throughout the organization. And really, we feel like that can deliver a lot of product in the marketplace.
You know, as I indicated earlier, we're, you know, we're putting out twenty-five to thirty million units a year, and we think we can do more with the existing infrastructure that we got. So whether it be driving our core business or growing some of these new strategic initiative areas, you know, adding that top line is just going to benefit because our SG&A will not increase as fast as our top-line growth. Any other questions? Great. Well, thank you for your time.