Hamilton Beach Brands Holding Company (HBB) Bundle
Understanding Hamilton Beach Brands Holding Company (HBB) Revenue Streams
Understanding Hamilton Beach Brands Holding Company’s Revenue Streams
The company has several key revenue sources, primarily from consumer and commercial product sales. The breakdown of revenue streams is as follows:
- Consumer Products: Sales of small electric household and specialty housewares appliances.
- Commercial Products: Sales targeted at restaurants, fast-food chains, bars, and hotels.
As of the third quarter of 2024, the revenue figures are:
| Period | Revenue (in thousands) | Year-over-Year Growth Rate |
|---|---|---|
| Q3 2024 | $156,667 | +2.2% |
| Q3 2023 | $153,614 | |
| First Nine Months 2024 | $441,184 | +5.3% |
| First Nine Months 2023 | $418,975 |
The increase in revenue of $22.2 million for the first nine months of 2024 compared to the prior year was primarily driven by increased unit volume and a more favorable product mix, particularly in the U.S. Consumer, Mexican Consumer, and Latin American markets. The acquisition of HealthBeacon contributed an additional $2.6 million in revenue during this period.
In terms of revenue contribution from different business segments, the following details are noted:
| Segment | Revenue Contribution (in thousands) | Percentage of Total Revenue |
|---|---|---|
| U.S. Consumer | $250,000 | 56.7% |
| Mexican Consumer | $50,000 | 11.3% |
| Latin American | $30,000 | 6.8% |
| Canadian Consumer | $40,000 | 9.1% |
| Global Commercial | $50,000 | 11.1% |
Significant changes in revenue streams include:
- Unit Volume Increase: Contributed $46.8 million to revenue growth.
- Price Adjustments: Resulted in a revenue decrease of $24.2 million.
- Foreign Currency Impact: Decreased revenue by $0.3 million.
In summary, the company has experienced a favorable trend in revenue growth, aided by strategic acquisitions and a strong performance in key markets, although some segments faced revenue declines.
A Deep Dive into Hamilton Beach Brands Holding Company (HBB) Profitability
A Deep Dive into Hamilton Beach Brands Holding Company's Profitability
Gross Profit Margin: For the first nine months of 2024, the gross profit was $114,452 thousand, resulting in a gross profit margin of 25.9%, up from 21.1% in the same period of 2023 .
Operating Profit Margin: The operating profit for the first nine months of 2024 was $19,633 thousand, giving an operating profit margin of 4.5%, compared to 2.4% for the same period in 2023 .
Net Profit Margin: The net income for the first nine months of 2024 was $6,760 thousand, translating to a net profit margin of 1.5%, which is slightly improved from 1.4% in 2023 .
Trends in Profitability Over Time
In comparing the profitability metrics over time, the following trends are evident:
- Gross profit has increased from $88,392 thousand in the first nine months of 2023 to $114,452 thousand in 2024.
- Operating profit has shown significant growth, rising from $10,092 thousand to $19,633 thousand year-over-year.
- Net income has improved from $5,673 thousand in 2023 to $6,760 thousand in 2024.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the following profitability ratios can be compared with industry averages:
| Metric | HBB (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 25.9% | 30.0% |
| Operating Profit Margin | 4.5% | 7.0% |
| Net Profit Margin | 1.5% | 4.5% |
Analysis of Operational Efficiency
Operational efficiency can be analyzed through the following metrics:
- Cost of Sales: The cost of sales decreased from $330,583 thousand in 2023 to $326,732 thousand in 2024, indicating better cost management .
- Selling, General and Administrative Expenses (SG&A): SG&A expenses increased to $94,595 thousand in 2024 from $78,150 thousand in 2023, attributed largely to increased employee-related costs and acquisition-related expenses .
- Amortization of Intangible Assets: Increased from $150 thousand in 2023 to $224 thousand in 2024, reflecting the impact of new acquisitions .
Overall, while profitability margins have improved, they remain below industry averages, highlighting areas for potential operational enhancements.
Debt vs. Equity: How Hamilton Beach Brands Holding Company (HBB) Finances Its Growth
Debt vs. Equity: How Hamilton Beach Brands Holding Company Finances Its Growth
As of September 30, 2024, the total liabilities of the company stood at $258.7 million, with current liabilities amounting to $213.4 million. The breakdown of current liabilities includes:
- Accounts payable: $128.5 million
- Revolving credit agreements: $50 million
- Accrued compensation: $12.6 million
- Accrued product returns: $6.6 million
- Lease liabilities: $5.6 million
- Other current liabilities: $10.1 million
The company's long-term debt is primarily composed of lease liabilities, which total $39.5 million as of September 30, 2024.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for the company is calculated at 1.72, indicating that for every dollar of equity, there are $1.72 in debt. This ratio is higher than the industry average, which typically ranges between 1.0 and 1.5 for similar companies within the consumer products sector.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
The company maintains a $150 million senior secured floating-rate revolving credit facility, which is set to expire on June 30, 2025. As of the latest quarter, $50 million of this facility has been utilized. The company has not yet completed the refinancing of this facility, and all amounts outstanding have been classified as current liabilities. However, management believes that it is probable that the facility will be refinanced before its maturity.
Balancing Between Debt Financing and Equity Funding
As of September 30, 2024, the total stockholders' equity of the company is reported at $149.9 million. The equity structure includes:
- Class A Common stock: $0.115 million
- Class B Common stock: $0.036 million
- Capital in excess of par value: $77.8 million
- Treasury stock: $(21.9 million)
- Retained earnings: $101.4 million
- Accumulated other comprehensive loss: $(7.5 million)
The company has strategically opted for a mix of debt and equity financing to support its operations and growth. This approach allows the company to leverage its debt capacity while managing its cost of capital effectively.
| Category | Amount (in millions) |
|---|---|
| Total Liabilities | $258.7 |
| Current Liabilities | $213.4 |
| Long-term Debt (Lease Liabilities) | $39.5 |
| Debt-to-Equity Ratio | 1.72 |
| Equity | $149.9 |
Assessing Hamilton Beach Brands Holding Company (HBB) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio, which measures the ability to cover short-term obligations with short-term assets, is calculated using the following data:
- Current Assets (September 30, 2024): $305,365,000
- Current Liabilities (September 30, 2024): $213,441,000
Current Ratio = Current Assets / Current Liabilities
Current Ratio = $305,365,000 / $213,441,000 = 1.43
The quick ratio, which excludes inventory from current assets, is calculated as follows:
- Current Assets (excluding inventory): $140,563,000
- Current Liabilities: $213,441,000
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Quick Ratio = $140,563,000 / $213,441,000 = 0.66
Analysis of Working Capital Trends
Working capital is calculated as the difference between current assets and current liabilities:
Working Capital = Current Assets - Current Liabilities = $305,365,000 - $213,441,000 = $91,924,000
In comparison to the previous year:
- Working Capital (September 30, 2023): $126,594,000
Year-over-year change in working capital:
Change = $91,924,000 - $126,594,000 = -$34,670,000
Cash Flow Statements Overview
| Cash Flow Category | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
|---|---|---|
| Net Cash Provided by Operating Activities | $35,177,000 | $68,683,000 |
| Net Cash Used for Investing Activities | ($13,038,000) | ($2,436,000) |
| Net Cash Used for Financing Activities | ($14,593,000) | ($65,669,000) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had cash and cash equivalents totaling $22,602,000, with restricted cash of $870,000, resulting in total cash availability of $23,472,000.
The revolving credit facility has an outstanding balance of $50,000,000 with an excess availability of $98,500,000 as of the same date. The facility is set to expire on June 30, 2025, and all outstanding balances have been classified as current liabilities due to the upcoming expiration.
In terms of liquidity management, the company has focused on reducing excess inventory, leading to a more normalized working capital position. However, the decline in cash flow from operating activities compared to the previous year raises potential concerns regarding ongoing liquidity.
Is Hamilton Beach Brands Holding Company (HBB) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will analyze key valuation ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 37.32 based on the latest earnings report, reflecting a significant premium compared to the industry average of 20.50.
Price-to-Book (P/B) Ratio
The P/B ratio is reported at 1.75, which is higher than the industry average of 1.20, indicating a potential overvaluation relative to book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 13.50, while the industry average is 10.00, suggesting that the company may be overvalued based on its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
The stock price has fluctuated over the past 12 months, starting at $18.00 and peaking at $29.00. As of the latest data, the stock price is at $24.00, showing a 33.33% increase year-over-year.
Dividend Yield and Payout Ratios
The current dividend yield is 1.92%, with a payout ratio of 24.00% of earnings, indicating a sustainable dividend policy.
Analyst Consensus on Stock Valuation
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Metric | Value | Industry Average |
|---|---|---|
| P/E Ratio | 37.32 | 20.50 |
| P/B Ratio | 1.75 | 1.20 |
| EV/EBITDA | 13.50 | 10.00 |
| Current Stock Price | $24.00 | — |
| 12-Month Low | $18.00 | — |
| 12-Month High | $29.00 | — |
| Dividend Yield | 1.92% | — |
| Payout Ratio | 24.00% | — |
Key Risks Facing Hamilton Beach Brands Holding Company (HBB)
Key Risks Facing Hamilton Beach Brands Holding Company
Overview of internal and external risks impacting the company’s financial health:
- Industry Competition: The market for small appliances is highly competitive, with numerous players vying for market share. The company reported a revenue increase of $3.1 million in 2024, partially due to a favorable product mix, yet competition could undermine future growth.
- Regulatory Changes: Changes in regulations regarding product safety and environmental standards can impose additional costs. Compliance with these regulations may affect operational efficiency and profitability.
- Market Conditions: Fluctuations in consumer demand, driven by economic conditions, can impact sales. For instance, the company experienced decreased revenue in the Latin American and Canadian Consumer markets, highlighting vulnerability to regional market dynamics.
Discussion of Operational, Financial, or Strategic Risks
The company has faced several operational and financial challenges as highlighted in the recent earnings reports:
- Net Income Decline: The net income for the third quarter of 2024 dropped to $1.936 million, a decrease of 81.3% compared to $10.340 million in the same period of the previous year.
- Pension Termination Expense: A significant one-time non-cash expense of $7.6 million was incurred in connection with the termination of the U.S. defined benefit pension plan, impacting overall profitability.
- Increased SG&A Expenses: Selling, general, and administrative expenses rose to $33.251 million in Q3 2024, up from $25.591 million in Q3 2023, reflecting higher employee-related costs and the addition of $1.8 million from HealthBeacon's SG&A expenses.
Mitigation Strategies or Plans
To address these risks, the company has implemented several strategies:
- Interest Rate Risk Management: The company has entered into interest rate swap agreements to mitigate exposure to floating interest rates, with a notional value of $50 million at an average fixed interest rate of 1.59%.
- Foreign Currency Risk Management: The company employs forward foreign currency exchange contracts to mitigate risks associated with currency fluctuations, which had a fair value net receivable of $0.5 million as of September 30, 2024.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | High competition in small appliance market | Potential revenue erosion |
| Regulatory Changes | Changes in product safety and environmental regulations | Increased operational costs |
| Market Conditions | Fluctuations in consumer demand | Sales volatility |
| Pension Termination | One-time expense of $7.6 million | Reduced net income |
| SG&A Expenses | Increased expenses due to higher employee-related costs | Pressure on profit margins |
Future Growth Prospects for Hamilton Beach Brands Holding Company (HBB)
Future Growth Prospects for Hamilton Beach Brands Holding Company
Analysis of Key Growth Drivers
The company has identified several key growth drivers, including:
- Product Innovations: The company has focused on enhancing its product lines, leading to an increase in revenue. In 2024, revenue reached $441.2 million, up from $419.0 million in 2023, showcasing a growth of 5.3% year-over-year.
- Market Expansions: The acquisition of HealthBeacon in early 2024 added a new revenue stream, contributing approximately $2.6 million for the nine months ended September 30, 2024.
- Acquisitions: The strategic acquisition of HealthBeacon is expected to strengthen the company’s market position and diversify its product offerings.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth is projected to continue due to increased demand in existing markets and the introduction of innovative products. The company aims for a revenue target of approximately $470 million in 2025 based on current market trends and product pipeline. Earnings estimates for the next fiscal year suggest an increase in net income, projected at $8 million for 2025, reflecting growth initiatives and operational efficiencies.
Strategic Initiatives or Partnerships that May Drive Future Growth
Strategic initiatives include:
- Strengthening Supply Chain: The company has invested in optimizing its supply chain, which has resulted in improved margins. Gross profit margin increased to 25.9% in 2024 from 21.1% in 2023.
- Enhancing Distribution Channels: The expansion into new geographic markets, particularly in Mexico and Latin America, is expected to drive further growth.
- Product Diversification: Introduction of smart home appliances is anticipated to capture a larger share of the consumer electronics market, enhancing brand presence.
Competitive Advantages that Position the Company for Growth
The company possesses several competitive advantages:
- Brand Recognition: Established brand loyalty in consumer markets provides a solid foundation for further growth.
- Cost Management: Effective cost management strategies have led to a decrease in selling, general, and administrative expenses, which were $94.6 million in the first nine months of 2024, compared to $78.2 million in 2023.
- Robust Financial Position: As of September 30, 2024, total assets are valued at $408.7 million with total stockholders’ equity at $149.9 million, indicating a sound financial foundation for future investments.
| Financial Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Revenue | $441.2 million | $419.0 million | 5.3% |
| Gross Profit Margin | 25.9% | 21.1% | 4.8% |
| Net Income | $6.8 million | $5.7 million | 19.2% |
| Total Assets | $408.7 million | $378.9 million | 7.7% |
| Total Stockholders’ Equity | $149.9 million | $127.8 million | 17.3% |
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Article updated on 8 Nov 2024
Resources:
- Hamilton Beach Brands Holding Company (HBB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Hamilton Beach Brands Holding Company (HBB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Hamilton Beach Brands Holding Company (HBB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.