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Operator
Hello, and welcome to the Hamilton Beach Brands Holding Company Q4 2021 Earnings Call. My name is Charlie, and I will be coordinating your call today. (Operator Instructions)
I will now hand you over to your host, Lou Anne Nabhan, Head of Investor Relations, to begin. Lou Anne, please go ahead.
Lou Anne Nabhan - Head of IR
Thank you, Charlie. Good morning, everyone. Welcome to our fourth quarter 2021 earnings conference call and webcast. Yesterday after the market closed, we issued our fourth quarter 2021 earnings release and filed our 10-K with the SEC. Copies are available on our website.
Our speakers today are Greg Trepp, President and Chief Executive Officer; and Michelle Mosier, Senior Vice President and Chief Financial Officer. Also participating in the Q&A will be Scott Tidey, Senior Vice President, Consumer Sales and Marketing.
Our presentation today includes forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in either the prepared remarks or during the Q&A. Additional information regarding these risks and uncertainties is available in our earnings release and our Form 10-K. The company disclaims any obligation to update these forward-looking statements, which may not be updated until our next quarterly conference call, if at all.
And now I'll turn the call over to Greg.
Gregory H. Trepp - President, CEO & Director
Thank you, Lou Anne. Good morning, everyone. Thank you for joining us. We're going to take the next few minutes to provide an overview of our performance for the fourth quarter of 2021, the full year 2021 and our prospects for growth in 2022.
For our company, we see 2022 as a year of opportunity. We expect to grow our top line and our bottom line as we build on the progress we made on many fronts in 2021. Certainly, the past few years have brought extraordinary challenges to our company, our industry and our world. We've navigated some tremendously adverse external conditions.
In 2022, we dealt with the unexpected COVID pandemic as it spread across the globe. In 2021, we worked our way through the many negative effects of the pandemic on the global economy, including supply chain disruptions and inflation. If you add in the hugely onerous tariffs that were imposed on certain imports from China starting in early 2018, our industry has encountered a new crisis every year since our company became public in September of 2017.
When you take all these external pressures into account, I could not be prouder of or more grateful for our outstanding team. They have demonstrated exceptional agility and resilience for several years running. Our people have worked incredibly hard, tirelessly as well as effectively, to mitigate the impact of these external challenges.
Our team has also risen to the occasion as we manage through the execution of some very big internal investments. We have converted to a new ERP system, which was demanding in many ways. Now that it is in place, we expect it to provide significant benefits for years to come.
We accomplished moves to new distribution centers in Canada and the U.S., which will support our growth in both the e-commerce and brick-and-mortar channels for years to come. Our new U.S. facility enabled us to expand direct-to-consumer shipping capabilities, which increases our ability to ship online orders from many retail customers. We did not move far from our former distribution center, and we're able to retain much of our workforce. We are grateful to all of our employees who are involved in completing this move.
Thinking about challenges over the past few years, we cannot lead out the difficult decision we made to close our Kitchen Collection business in 2019. The decision becomes even more well timed after the events of 2020 and 2021 are considered. The pandemic seems to be waning. While supply chain constraints and inflationary pressures continue, they are expected to ease over time. We are certainly better equipped to deal with them while they endure.
More importantly, I want to highlight the many successes we achieved in 2021 due to our investments in recent years. I'm very excited about the direction of our company. I want to focus now on our key accomplishments and plans. In 2021, revenue was the highest in our company's history. We realized significant progress on all of our strategic initiatives.
Our initiatives for e-commerce, the premium products market, the global commercial market delivered double-digit revenue growth. We signed 2 agreements in the fast-growing home health and wellness market. Under these agreements, we plan to introduce new products in the air purification, the home medical categories in 2022.
Let me delve into more details regarding the progress we made with our initiatives and our plans for additional growth. We made significant progress with each initiative in 2021 and are in a very good position to continue to build on the momentum. We believe each of our initiatives will provide growth in 2022.
First, our goal to accelerate our digital transformation is going extremely well. The e-commerce channel represents a very strong and fast-growing part of our business. It enables us to connect directly with consumers through detailed product information, video and digital marketing as a valuable way to help consumers understand the benefits and value of our products.
In 2021, our total company e-commerce sales increased 22% and accounted for 38% of our total revenue. In our U.S. consumer market, e-commerce accounted for 45% of our total revenue. We have a presence across multiple e-commerce platforms. All of our 9 brands are earning star ratings at 4.2 or better, and 5 of our brands are rated 4.5 stars or better. Our products receive favorable reviews from consumers, experts and influencers. Hamilton Beach continues to be the #1 brand in the U.S. e-commerce channel based on units sold.
Our e-commerce capabilities have become increasingly sophisticated. We are continuing to invest in them. We're supporting growth in digital engagement with online marketing programs, expanding our direct-to-consumer distribution operation and increasing our participation with pure-play and omnichannel customers.
Next, I'll discuss our goal to gain share in the premium market. Premium products account for approximately 40% of the U.S. small kitchen appliance industry's annual sales. Since we began to build out our (inaudible) 2014, it has grown to be a meaningful part of our business.
Our premium products have higher margins than many of our other consumer products. In 2021, sales of our premium products increased 33% and accounted for 13% of total revenue. We generated significant sales increases for all of our premium brands. They include Weston, Wolf Gourmet, the Bartesian premium cocktail machine, CHI premium garment care products and Hamilton Beach Professional appliances. We introduced new products for every brand in 2021.
We plan to further expand our presence in the premium market with continued new product development, digital marketing and by pursuing additional licensing agreements and other collaborative arrangements. The Wolf Gourmet portfolio now covers 10 high-demand categories. The brand is expected to continue to grow in sales in 2022.
With the Bartesian premium cocktail machine, plans are in place to launch Generation 2 this year. This upgraded model will provide enhanced functionality. Line extensions are under development, including a commercial-grade model, Bartesian revenue stream includes the machine and an extensive and ever-expanding line of drink mix capsules.
The CHI premium garment care brand continues to grow as more people return to offices to work and engage in evening and weekend activities, including travel. We are introducing new products from our Weston brand, which is targeted to gardeners and hunters New items include updated meat grinder and slicer models, smokers, food dehydrators and vacuum sealers.
Our Hamilton Beach Professional line leverages our commercial products expertise for the benefit of home cooks. The product portfolio now includes 14 high-demand categories. The brand continues to gain new channel placements.
We have a new brand we are adding to our premium portfolio that I will mention today. We recently launched the premium hand mixer for the Magnolia Bakery. Magnolia Bakery started in Manhattan's West Village a little over 20 years ago and has since become a global brand.
The bakery has begun to market novelty items and baking tools carrying its brand name, along with its line of cookbooks. They asked us to partner with them on a vintage style hand mixer in their signature blue color. Can't help but suggest that for anyone who will be in the market for a Mother's Day gift in May, our mixer and a Magnolia Bakery cookbook are a great idea.
Another initiative is to lead the global commercial market. Our commercial products sell at higher prices and have higher margins than most of our consumer products. Our revenue from commercial products increased 36% in 2021 and account for 6.2% of our total revenue. The global commercial business suffered a tremendous [downturn] in 2020 due to Pandemic-driven demand softness as the food service and hotel industry suffered tremendous declines in business.
It was great to see it rebound strongly in 2021. Our growth plans for this marketing (inaudible) and expanding customer relationships with regional and global restaurants and hotel chains. We also continue to invest in e-commerce, which is becoming increasingly important to the commercial products market. We expect our commercial business to grow significantly in 2022.
Our newest initiative is to expand in the home health and wellness market. This initiative was added in 2021. As mentioned, we entered into 2 agreements that will enable us to increase our presence in this market. Our focus last year was on developing plans and new home health and wellness products that we plan to launch throughout 2022.
We entered the water filtration category late last year with our new Hamilton Beach AquaFusion electric countertop system. AquaFusion provides superior water filtration, fresh taste using a proprietary carbon block filter. We also offer flavor capsules, which provides a consumable revenue stream. AquaFusion is eco-friendly. Each filter contained -- eliminates 750 single-use plastic bottles.
We've expanded our participation in the air purifier category through an exclusive multiyear trademark licensing and product development agreement with The Clorox Company. We are introducing 3 new Clorox air purifier models and replacement filters in the first quarter of 2022. These include medium and large room models and a tabletop model. We plan to launch additional new models later this year.
The air purifier category is expected to be -- to continue to be strong given the benefits these machines provide to (inaudible) consumer concerns. We also entered the home medical market through an agreement with a company called HealthBeacon Limited. HealthBeacon is a leading developer of smart tools for managing injectable medications at home.
Certainly, the home medical market is newer to us and it offers (inaudible) than the others who are entering in the home health and wellness space. Let me provide an overview of what attracted us to this opportunity. The aging population is increasingly living with and managing chronic health conditions. Demand for personalized medical health care solutions is rising in lockstep. The need exists in younger demographics as well.
Our product (inaudible) HealthBeacon (inaudible) Smart Sharps Bin powered by HealthBeacon. We entered 2022 with a new direct-to-consumer sales website for the system. We are in the process of adding retail distribution for online and brick-and-mortar sales, focusing on placements in pharmacies and relationships with the medical community to recommend the system to their patients. The system will provide revenue from the appliance sale and from monthly subscriptions that help patients manage adherence to their personal medication regimen using our technology in an app.
Another initiative is to drive core brand growth. Even as we work to expand in new markets, we remain intently focused on accelerating the growth of our core brands, Hamilton Beach and Proctor Silex. They've competed successfully in our heritage North American marketplace for over 100 years. Innovation and new product development have always been the lifeblood of this business.
During 2021 and 2022, we are introducing more than 100 new product platforms, many of them are for our 2 core brands. Core brand sales increased 6% in 2021. This growth reflects the success of new products in high-volume categories such as coffee, among others, and a repositioning of the Proctor Silex brand to a simply better position, increased digital marketing and optimizing existing products. Hamilton Beach holds the top 3 market share in more than 25 categories.
Finally, we have an initiative to leverage partnerships and acquisitions. We have significantly increased our focus on this initiative. We prioritize opportunities that will provide entry into consumer or commercial markets, where we can become stronger participants. We are actively engaged in the pursuit of additional collaborations or acquisitions that should drive growth in all of our markets in 2022 and beyond.
To quickly summarize all of our strategic initiatives to provide exciting future growth opportunities and potential, we expect to build on the significant progress we made in 2021. Now I'll turn the call over to Michelle.
Michelle O. Mosier - Senior VP, CFO & Treasurer
Thank you, Greg. Good morning. I'll comment first on our fourth quarter 2021 results compared to the fourth quarter of 2020 and then discuss our outlook. As a reminder, the 2020 fourth quarter is a difficult comparison as our revenue was unusually high. This was due to a significant amount of order backlog fulfillment that shifted from the third quarter of 2020 during our cutover to our new ERP system in the U.S.
Net sales were $197.8 million compared to a record $234 million in the fourth quarter of 2020, a decrease of 15.5%. In addition to the difficult comp, we encountered persistent supply chain congestion, which hindered our ability to fully satisfy retailer and consumer demand. Orders were strong in every market, and our products sold well at retail. However, our third-party manufacturers in China struggle to produce our elevated order levels and the ongoing challenges with securing containers, coupled with the long ocean transit time, slowed the movement of finished goods from China to the U.S., delaying the arrival of inventory.
In spite of the overall decline in revenue, we were very pleased to see that the momentum in the Latin American market continue into the fourth quarter, and revenue for this market more than doubled. In the global commercial market, revenue also continued to grow and increased 13.9%. Both markets have rebounded from pandemic-driven demand softness in 2020. The revenue decreases compared to prior year occurred in the U.S., Canadian and Mexican consumer markets.
As Greg mentioned, we continue to make progress with our initiatives as demonstrated by sales of our premium brand products increasing 24.6%. Our e-commerce sales were flat year-over-year but as a percentage of fourth quarter sales, e-commerce sales grew to 47.7% compared to 40.7% in the prior year. The pandemic drove a significant increase in online shopping in 2020, and in 2021, consumers returned to a higher level of shopping in stores. So we're very pleased with our e-commerce sales level.
Turning to gross profit. Our margin contracted to 21.8% compared to 23.3%. This was primarily due to less favorable product and customer mix. We implemented price increases in the second half of 2021, which offset higher product and transportation costs in the fourth quarter. Our selling, general and administrative expenses decreased about 3% to $25.1 million compared to $25.9 million. The decrease was primarily due to lower outside service expenses and lower overall employee-related costs.
Operating profit was $17.9 million compared to $28.4 million, and net income from continuing operations was $12.6 million or $0.90 per diluted share compared to net income of $19.4 million or $1.40 per share. For the year ended December 31, 2021, cash flow before financing activities was $6 million compared to a use of cash of $31.7 million in 2020. Changes in net working capital resulted in a use of cash of $1.5 million in 2021 compared to $66.9 million in the prior year.
The benefit of the lower cash used for net working capital was partially offset by capital expenditures in 2021 of $11.8 million compared to $3.8 million the year before. The 2021 amount included our investment in our U.S. distribution center. This was partially offset by $4 million in lease incentives and tenant improvement allowances classified as cash provided by operating activities. Net working capital increased by $4.3 million as trade receivables decreased by $25.2 million due to the timing of receipts and lower sales.
Inventory increased by $9.4 million, primarily due to supply chain constraints that delayed arrival of some inventory to late in the fourth quarter that did not provide enough time for us to turn it for the holiday season. Accounts payable decreased by $20.1 million due to timing. Net debt at December 31, 2021, was $95.7 million compared to $95.9 million at December 31, 2020.
Next, let me turn to our outlook. In 2022, overall demand for small appliances is expected to remain above pre-pandemic levels, although significantly softer than in 2021. Industry expectations are that the pandemic lifestyle likely will not shift entirely back to pre-pandemic modes. As the pandemic wanes, we will monitor closely any shift in consumer needs and behavior away from the home.
The global commercial market is expected to continue to rebound strongly from the pandemic-driven demand softness. I will note that this view does not take into account any potential negative impact on the global economy of the war in Ukraine. Depending on how things evolve, business conditions could change.
For the full year 2022, we expect that continued progress with our strategic initiatives will enable us to deliver modest revenue growth compared to 2021. Our core business is solid. We expect to continue growth in the premium and global commercial markets, and we expect to begin to benefit from the sale of new products in the home health and wellness market.
For the first half of 2022, we expect revenue to decrease modestly in comparison to a very strong first half of 2021 and as issues related to product availability and supply constraints continue. For the second half of 2022, we expect revenue to increase moderately. This outlook includes the benefit of new products for the home health and wellness market that will launch throughout the year and the continued strength of our core products.
We have planned for supply chain constraints and rising product and transportation costs to continue through this year. Timing for any easing of these pressures remains uncertain. To mitigate rising costs, we have implemented pricing initiatives that are becoming effective during the first quarter of 2022. We plan to continue to adjust prices as necessary to offset rising costs, while also remaining competitive with retail customers and consumers. We may not be able to cover all future cost increases with additional pricing initiatives.
Even amid these pressures, we will continue to focus on managing margins and working capital within historic ranges to the fullest extent possible. We expect full year operating profit to increase, mostly driven by the higher revenue and also due to a modest improvement in gross profit margin.
We reported in our 10-K that at December 31, 2021, we had $1.9 million of accumulated other comprehensive losses related to our Brazilian subsidiary, which will be recognized in net income upon its substantial liquidation. This event is expected to occur in the first half of 2022.
That concludes our prepared remarks and we'll now turn the line back to the operator for Q&A.
Operator
(Operator Instructions) Our first question comes from Justin Kleber of Baird.
Unidentified Analyst
This is [Zach Beck] on for Justin. Maybe to start off, can you discuss a bit about your relationship with your largest customer? We noticed they accounted for 28% of the business this year versus 35% in 2020. I'm just curious if there have been any changes on that front.
Gregory H. Trepp - President, CEO & Director
This is Greg, and I'll let Scott follow up on this. So I think there's -- we have a great relationship with -- really across our entire portfolio of customers, and we've got tremendous growth going on with some and some are -- some will go up 1 year and down another year. So really, the reality is we've got a mix shift going on from across divisions, but from a customer standpoint, we've got strong growth in some areas such as e-commerce and a little slower growth in some other areas.
So really, I think it's not an indication of weakness in any particular customer. It's really, I think, just short-term ups and downs. And over time, we feel like we're in really good position with all of our top customers. I don't know, Scott, if I said that in a way that you would agree.
R. Scott Tidey - Senior VP of North American Sales & Marketing
Yes, Greg, I do agree. I think there's certainly a mix between the different countries where we have our largest customer in some of their different outlets. And so there has been some shift there. But overall, our distribution points are still very strong. Some of them had stronger sales in the 2021 time period versus the prior year and others were a little bit softer.
So I think we just kind of moved a little bit with them. And then we had some other retailers in our portfolio. They just got bigger. And because of some of our strategic initiatives, they just -- some of these other customers just became a bigger part of our portfolio.
Gregory H. Trepp - President, CEO & Director
Just wanted to say, a good point that Scott mentioned, when we list our top customer, it can be many different banners of that one customer across really our global platform. So there might be one banner in one country that might also throw the mix off a little bit. But thanks, Scott, answered it very well.
Unidentified Analyst
Yes. No, got you. That makes sense. Looking at your commercial business, it sounds like the recovery there continued nicely during the fourth quarter. and you guys ended the year with nearly [$400 million] in sales there.
Can you talk a bit about how supply chain constraints are impacting that business in particular? While it grew nicely with 36% growth in 2021, how much stronger do you think it could have been?
And then, Greg, going back to your comment about significant commercial growth anticipated in 2022. Do you think the commercial business can get back to pre-pandemic levels next year that you guys saw in 2018, 2019?
Gregory H. Trepp - President, CEO & Director
So on the supply chain, it's definitely affecting all of our businesses. They're -- getting product produced was one ongoing challenge as our suppliers struggle with all sorts of things related to production and demand and then just getting it to where it needed to be on time was a factor. So definitely supply chain hampered what we could have sold in commercial as well as our entire portfolio, the U.S. consumer, Canada, Mexico, et cetera. So I think we definitely missed out on what could have been higher results.
I think as we go into 2022 that the demand from those customers, the commercial customers is still very, very strong. We have a solid backlog. So as soon as we can get product produced and to them, we have orders in hand. So how that will play out as the year goes on. Right now, that's how it stands in the first half of this year. Certainly, some parts of the world are slowing down here because of what's going on in Ukraine and Russia. But overall, the demand is very strong and as long as we can produce the products and get them there, we expect continued growth in 2022.
Unidentified Analyst
Got you. Yes, that's good to hear. Shifting gears to your guidance for next year. I know, Michelle, you mentioned your outlook includes a modest improvement in gross margin, which seemed to contribute to operating income growing faster than sales in 2022.
As we think about the magnitude of improvement there, do you think you can achieve a rate similar to the 21.8% level at which you exited the fourth quarter of this year?
Michelle O. Mosier - Senior VP, CFO & Treasurer
Yes, Justin, I think -- sorry, Zach, I apologize. I think -- no, no, we did have some significant costs run through the distribution chain this year, particularly with outbound transportation as well as inbound transportation. So we are in hopes that we'll get back into that normal range of operating profit margin next year.
But again, all of it does depend on what we see in the economy. As we mentioned, we're taking some price increases in the first quarter. And if we can keep up with that throughout the year, then we should be back to where we want to be.
Unidentified Analyst
Sure. That makes sense. And just to follow up on that point. The last question we had was around pricing. As you mentioned, that round of price increases is untapped in the first quarter.
Can you give us a sense for the magnitude of these compared to your previous price actions taken in the second half of this past year, just given that the cost pressures across products and freight have escalated? And then on top of that, have you heard of any unit elasticity from your vendor partners in regards to how demand has fared?
Gregory H. Trepp - President, CEO & Director
Scott, you want to go ahead and take that one?
R. Scott Tidey - Senior VP of North American Sales & Marketing
Sure. I can start on that. So yes, if you look at the price increases, we had taken several increases in 2021 to offset both the cost coming from our suppliers and the transportation cost. And as we kind of project, we haven't quite finalized what we think will be in the first half of this year, but we're starting to look at our new contract rates on containers and our -- we're working with our suppliers.
But I do think all the retailers that we're dealing with are having the same challenges. We're all bringing most of our product from Asia, and so our increases are in line with the competitive market. And it seems like our suppliers are certainly understanding as they have to deal with the same types of challenges getting in containers. So we'll definitely be continue to -- as we get these contracts negotiated and new pricing, we've been -- we feel very effective in passing these on in a timely manner to try to mitigate the margin erosion.
Gregory H. Trepp - President, CEO & Director
Zach, just building on what Scott said. So Scott and his team and the commercial team have done a great job working closely with retailers to figure out what's best for the pillar for us and for consumers. And that all went into effect in the first quarter, as Michelle said. Scott's also referencing we're all going through contract negotiations on container rates, and we'll be working with our suppliers soon on back half costs.
So there'll very likely be more price increases midyear tied to whatever the cost position is, again, we'll do the same thing. We'll figure out what is going to be impact on our businesses, work with our retailers to implement it in a way that works for everybody. So my assumption is there will be continued price increases going to the back half of 2022.
Operator
(Operator Instructions) There are no further questions on the line at this time, so I'll hand the call back over to Greg Trepp for any closing remarks.
Gregory H. Trepp - President, CEO & Director
Thank you. We appreciate the opportunity to share with you today what we believe are strong prospects for future growth. As we've always said, our company is focused on long-term value creation. We are fortunate to be a leader in an industry with durable demand. We also believe that new cooking habits developed during the pandemic will endure, especially for young people.
Many of you have been shareholders since our spin-off in 2017. I thank you for your confidence in our ability to deliver in our commitment to build long-term shareholder value. That concludes our report for today. Thank you again for joining our call.
Operator
This concludes today's call. Thank you for joining. You may now disconnect your lines.