Good morning, everybody. Very pleased to welcome our next company to the stage here. We have Hamilton Beach Brands, which is a leading small home appliance business that has more recently made inroads into the commercial appliance business, the premium end of the market, as well as home health care. To tell you more about the business and this past year, especially navigating the tariffs, we have President and CEO Scott Tidey, as well as CFO Sally Cunningham. I'm going to turn it over to Scott to tell you more about Hamilton Beach Brands. Scott?
Great. Thank you. Good morning, everyone, and thank you for joining us today. Sally and I are excited to share with you some key insights about Hamilton Beach Brands Holding Company. Before we get started, just a reminder about our Safe Harbor Statement. Please be sure to read it carefully. Hamilton Beach is a prominent name in the world of small appliances. With a legacy spanning 115 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 kitchen appliances. Our core consumer market is North America. We've made important strides, increasing our focus on the premium market and the global commercial market. More recently, we've become a provider of connected devices and software for home health care management, reflecting our commitment to innovation and improving lives.
We became public in 2017 and were traded on the New York Stock Exchange. We generate over $600 million in annual revenue, and we sell over 25 million units annually, which underscores our significant market presence and customer trust. We are dedicated to profitable growth while also managing capital and debt. We provide a powerful, owned brand portfolio anchored by our flagship brand, Hamilton Beach. Hamilton Beach has been trusted by consumers for more than a century, symbolizing our long-standing commitment to quality and innovation. The solid foundation of our flagship brand, Hamilton Beach, enables us to invest in growth initiatives in the premium, commercial, and home health markets. We have secured exclusive multi-year trademark licensing agreements with a number of prominent consumer brands. These agreements not only elevate our portfolio, but also allow us to offer products at higher prices and margins.
We participate in more than 50 product categories, demonstrating our ability to meet a wide range of consumer needs. We participate in high-demand categories where consumers' interest is strong, and our products are well-positioned to capture significant market share. As a result, the Hamilton Beach brand portfolio is number one in units. 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 with improved everyday living. We gather data and feedback from over 300,000 consumer touchpoints every year. We are doubling our innovation team resources and leveraging AI technologies to validate and accelerate our time to market with innovative solutions. Our goal with every new product is to offer unique benefits that exceed the needs of our consumers and create a lasting value. Here you can see some of our recent product launches.
You can see a heavy focus on garment care, where we've been taking market share. In the middle, we are adding two new innovative products to the large single-serve category. Blending is a big part of our heritage, and we have four new amazing offers addressing performance, preservation, and portability. And we have three new offerings in ovens addressing the constrained counter space, easy access to food, and air fry capabilities. 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 cultivate across the industry. In the consumer market, our products are distributed through all key channels, ensuring broad market reach and accessibility. This includes mass retail, e-commerce, and the premium channels, allowing us to meet consumers wherever they choose to shop. Our commercial relationships are global, with a strong focus on large restaurants and hospitality chains.
For home health, in a brief time, we have quickly developed deep relationships with large specialty pharmacies like Accredo, Optum, CenterWell, and Lumicera, and are layering on more pharmaceutical companies to our platform. To offer a little bit more color on our infrastructure and third-party manufacturing model, Hamilton Beach Brands leverages a global infrastructure and asset-light business model by outsourcing manufacturing to third-party partners across the Asia-Pacific region. We also have dedicated engineering and quality teams in the APAC region that are Hamilton Beach employees. These feet-on-the-ground teams ensure our high-quality standards are maintained across all of our supplier locations. In recent years, we have strategically diversified our supplier base beyond China to include partners in Indonesia, Thailand, and Vietnam. With import tariffs now at parity across APAC countries, we retain the flexibility to shift production among suppliers and regions to optimize economic outcomes for our business.
Now I'm going to talk about our six strategic growth initiatives, which are key to our long-term success. These are: drive growth of our core business, accelerate our digital transformation, gain share in the premium market, lead in the global commercial market, accelerate the growth of Hamilton Beach Health, and leverage partnerships and acquisitions. I'm going to cover the first three and turn it over to Sally. Our first initiative is focused on driving the growth of our core business, a critical area where we are already leading the market. Hamilton Beach is the number two small kitchen appliance brand in the U.S. by units sold and recently moved up to number four in dollars, a position we intend to strengthen even further. Our growth plans center around introducing more innovative new products. In 2025, we introduced an exciting lineup of new products across a high number of categories.
To support these new products, we are significantly increasing our investment in digital social media and influencer marketing, which takes me to our next strategic initiative, accelerate our digital transformation. The way the consumer is exposed to our brands and products has changed dramatically over the last five years. Add generative AI-assisted shopping, and this will only accelerate changing shopping habits in years to come. We start with a strong foundation with our e-commerce capabilities. We reinforce that foundation with consistent, strong consumer reviews and ratings averaging 4.5 stars across our brands. However, we are having to pivot quickly to better connect with the consumer. We must be relevant when the consumer decides to buy their appliance, and we must be present and featured across a variety of platforms to influence their purchase decision.
To do this, in 2026, we've added resources and increased our advertising investment to more than the past four years combined.
My partner and I are completely opposite in the kitchen. I love to cook, and he loves to eat. Today, I'm using the Hamilton Beach Dual Breakfast Sandwich Maker, perfect because we both get exactly what we want. His breakfast, ham, cheese, and a classic egg and a whole bagel. Mine's smoked salmon, cottage cheese, capers, and dill. He's a blueberry guy, and I'm all about kiwis. And even though we're so different, we complement each other because we start the day together. And with Hamilton Beach, we both have breakfast our way.
Our third initiative focuses on gaining a larger share in the premium market, an area where we see substantial growth potential. We own some of our premium brands, such as Weston, Hamilton Beach Professional, and the recently launched Lotus Professional, while others are available to us through exclusive multi-year trademark licensing agreements. Our share of the U.S. premium market, which totals approximately half of the U.S. appliance market, is about 1%. We have so much room to grow in this segment. Our growth strategy includes the recent introduction of Lotus Professional in 2025 and the upcoming mid-year launch of Lotus Signature. Born from a deep understanding of both culinary artistry and technical precision, Lotus is more than just a brand of chef-inspired tools. It's a promise of culinary confidence, a philosophy focused on savoring and sharing passionate preparation, and its delicious results.
Our key launch partner is already seeing POS sales well above their expectations, and as a result, expanding the product offerings and increasing the store count. The Lotus Professional and Lotus Signature launch will be supported by $6 million in advertising over a 15-month window. As you can see, we're not just launching a couple of products in a couple of categories. Both the Lotus Professional and the Lotus Signature launches play in the biggest categories at premium price points. These distinct lines also appeal to two very different consumers. Now let me show you a little bit more about the Lotus Professional launch.
Now I'll turn it over to Sally to discuss our next three strategic initiatives.
Great. Thank you, Scott. Our next growth initiative is around our global commercial market. The global commercial market is a higher margin, multi-billion dollar market. Commercial business was about 8% of total revenue in 2024, so there is significant room for growth. Our commercial business offers a full line of innovative products for the food service and hospitality industries. Products include high-performance blenders, drink mixers, and food preparation products for the food service industry, and in-room appliances for the hospitality industry. Growth in this business is focused on our Hamilton Beach Commercial brand, as well as partnerships with Sunkist and Numilk. Starting with partnerships, in 2025, we announced a new agreement with Sunkist to develop and market Sunkist-branded commercial juicers and sectionizers. These juicers and sectionizers are used in leading restaurants, schools, and a large restaurant chain throughout the U.S., and this agreement was immediately accretive to our commercial business.
Our commercial business also has an agreement with Numilk to manufacture and sell plant-based milk systems that are popular with independent coffee shops and health chains. Both the Sunkist and Numilk brands complement our Hamilton Beach Commercial brand, and we believe that there is opportunity for growth for each of these brands in the U.S. and to expand into international markets. For our Hamilton Beach Commercial brand, there's a real growth opportunity within regional and global chains. One product that's doing well in this area is our Summit Edge commercial blender. The Summit Edge has advanced technologies for blending and mixing and offers best-in-class performance for smoothies, blenders, and beverage blending. The Summit Edge blender can be found in major restaurants and convenience chains. Here's a short video that'll tell you a little bit more.
Do you need fast, consistent results for all your recipes? Summit Edge with Power Blend can blend even your toughest recipes to perfection, delivering speed of service, quiet operation, and one-touch convenience to every location and application. Combining a powerful 3.5 peak horsepower motor and our unique container, Power Blend is an innovative technology that delivers fast blend times and a creamy profile. From green smoothies to acai bowls, all operators, including new hires, can achieve the same results every single time. Now that's good thinking. To find out more about our products, warranties, accessories, and other technical information, visit our website at hamiltonbeachcommercial.com.
Our next growth initiative is around Hamilton Beach Health. In 2021, we created the Hamilton Beach Health brand, and in 2024, we acquired HealthBeacon, a medical technology startup, with the idea of combining Hamilton Beach's hardware strengths with HealthBeacon's software expertise to offer digitally connected devices that solve pain points for at-home patient care. Today, our primary product is the Smart Sharps Bin, a digitally connected device that helps patients manage at-home injectable medications. The system provides medication reminders, tracks injections, and increases patient adherence to expensive injectable medications. Patients receive a prompt via blue light and text alerts, and their injection history is logged both for themselves and their healthcare providers. The companion app offers personalized schedules and 24x7 support, making the overall process easier and significantly improving patient adherence and treatment success.
The Smart Sharps Bins are sold through direct contracts with specialty pharmacies and pharmaceutical manufacturers, utilizing a subscription-based revenue model that delivers high margins and recurring income. The business is growing as expected and reached positive operating profit in the third quarter of 2025, just 18 months after the HealthBeacon acquisition. Over the next few years, we plan to add more pharmacies and specialty pharmacies to our client base, broaden our product offerings for additional medications, and offer software improvements to enhance the patient experience. And our final strategic initiative is to leverage partnerships and acquisitions. Our approach is disciplined. We seek businesses that fit strategically within our portfolio and leverage our strengths. Over the past 10 years, we've made two strategic acquisitions with Weston and HealthBeacon, and we've also made strategic partnerships.
Our agreements with Clorox and CHI expand our product offerings in the consumer market in air purification and garment care and complement our Hamilton Beach brand, and our agreements with Sunkist and Numilk expand our product offerings in the global commercial market and include sectionizers, juicers, and plant-based milk systems that complement our Hamilton Beach Commercial brand. We continue to be M&A inquisitive and evaluate accretive acquisition opportunities that would drive growth in all of our markets. I'd like to say a few words about 2025 and looking ahead into 2026. There is no doubt that 2025 was a challenging year through an ever-changing tariff environment, but as a company, we were able to pivot our business and are well-positioned as we head into 2026. Hamilton Beach reported strong performance in 2024 with record margins, and that momentum carried into our first quarter of 2025 results.
And we were well down our path of our multi-year strategy to diversify production out of China and into other APAC countries. But in early 2025, new tariffs on China and APAC imports were introduced, starting at 10% and getting as high as 125% in the second quarter. And during that time, retailers paused orders, and overall demand was down in the second and the third quarters. Hamilton Beach pivoted and responded accordingly. We implemented price increases. We announced a free trade zone. We accelerated our supplier diversification efforts, and we took $10 million out of our cost structure. As we close out 2025, we were well-positioned. Tariffs are at parity between China and other Asia-Pacific suppliers. In some cases, it's more economically beneficial to manufacture in China, and in other cases, it's more cost-effective to manufacture in Vietnam, Thailand, or Indonesia.
But we've built a core competency to be able to shift manufacturing between suppliers and countries that are in the best economic interest of the business. And we are well-positioned as we head into 2026. Our performance is projected to improve versus 2025, benefiting from the sourcing, pricing, and expense actions that we took over the past year, along with more normalized market conditions. We expect purchasing patterns to continue to normalize and revert back to steady state by mid-year. But we don't expect recovery to be linear as we face a tough Q1 comparison, but see a path to recent historical growth and gross margin levels. And we anticipate our balance sheet to remain strong with low leverage ratios and free cash flow in our historical range. And we plan to continue investments to support our growth and our M&A strategies that we've discussed here today.
So there have been many global and macroeconomic challenges over the last five years that have faced this industry. But Hamilton Beach Brands has successfully navigated each of these challenges, and we have a playbook to navigate future challenges. We have a sharpened focus, well-defined and actionable strategic initiatives, and we have a strong balance sheet and free cash flow to fund future growth over the next year and into the future. So let me leave you with a summary of our strategic initiatives. Starting with our consumer market and our flagship brand, Hamilton Beach, we recognize that U.S. consumer shopping behaviors have and will change with the adoption of generative AI. So we are making significant investments not only in innovation, but in digital marketing and advertising so that we can continue to connect with the consumer as generative AI has more and more influence over shopping trends.
In the premium market, we are very excited for our new Lotus brand to drive growth in the market with the Lotus Professional available now and the Lotus Signature launching in mid-2026. In the commercial market, we have a targeted focus on growth in large industry chains with products like the Summit Edge Blender that we highlighted today. And we're expanding our customer base to drive future growth with Hamilton Beach Health, as well as launching other products that combine hardware and software to solve in-home patient pain points. And we continue to be M&A inquisitive and evaluate acquisition opportunities to accelerate future growth. So putting this all together, we are well-positioned heading into 2026, and we look forward to another good year. Thank you for your time. If you have any questions, we invite you to stop by one of our breakout sessions at 9:30 A.M. and 2:00 P.M. today.
Thank you.