FGI - Earnings call transcript Q4 2023

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Operator

Good day, and welcome to the FGI Industries Fourth Quarter 2023 Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Paul Bartolai, Managing Director at Vallum Advisors. Please go ahead.

Paul Bartolai

Thank you. Fourth Full Industries Conference XXXX FGI Call. to Quarter Year and Results Welcome today CEO, President Chief the are Leading call and Perry Financial Lin. David Officer, and Bruce;

control. our the We statements, like would which, include are on you and nature, closed release today's a commentary remind and uncertain after by management's of to issued yesterday results. their press to the detailing and forward-looking responses recent that I conference operational financial may company's market outside questions call

forward-looking based differ and are these beliefs, actual expectations Although management's current statements on results materially. may

that discussion cause refer a of section with For some Risk of the results please of the factors differ, SEC. latest filings the could to our Factors actual to

in of the the release and that in presentation, website. the yesterday this press please of find Additionally, note measures you issued appendix is can company's financial available which on reconciliations historical non-GAAP

with Today's prepared line David a questions. followed by from call review the for will of update from At begin and open strategic the Bruce, we Lin. will conclusion review the financial your performance Perry remarks, these

to that, the turn call Dave. I'll over With

David Bruce

Good pleased Paul. fourth our everyone, Thanks, XXXX. results joining you we quarter as improved enter with and momentum solid I'm today. and our call for morning, extremely thank

in products we our organic seen quarter under businesses made or trends during the growth have due to year experienced the initiatives channels the brands, in levels We our normalize, across BPC inventory we and investments fourth order throughout improved our key and large strategy. part

groundbreaking engaging has This reaffirmed propelled us the kind at of carried and its positive not from XXXX, bolstered a Kitchen resoundingly further the standing to industry in Vegas, momentum as and Bath also reception North recent America. order Las of presentation has our to heights. new by improved the into recent has Show in leader months early The event only but the customers largest the products our in success

of by X our sparked the latest Show Flush Kitchen enthusiastic toilet accolades breakthroughs, The Our including our awards. was track anti-overflow further for response has designs and Guard on me recent winning the we KBIS in confidence XXXX. significantly marked are technological These results innovation prestigious Bath from garnered continued improved participation and events attendees interest our at unveiling by for in cementing give which designs, and and reputation considerable excellence. anticipation,

Bath segment, experienced be year-over-year portfolio during fourth showed quarter. quarter, We of growth offerings. trade-down of during segments our momentum, business furniture by in of stable X.X% Each business levels. across driven weakness than to impacted normalization which by ended continues improved and trends the solid growth a demand end-market our our Total most generally and fourth demand order fourth inventory the other quarter, lower-priced revenue down to the

improvement, margin Our strong gross result margin ongoing the products of with higher-margin increasing gross XX.X%, in quarter as another basis fourth company. XXX fourth on public quarter gross profit during increase drove highest gross a points quarterly margin This XX.X% a to quarter. roughly drove focus our

progress progress these of quarter, obscuring coming the to and on had It in to While XXXX, during the exciting much show our continue in growth inventory make to fourth initiatives. of we see our to headwinds quarters. we the the begin see been through very is more expect results destocking during efforts this

long-term BPC public efficient that our through a driving organic was first strategic capital ago, value shareholder on to X enhanced as margin based company our call our On years deployment. drive performance plan I strategy, introduced and growth

am of during XXXX, headwinds during year. many and the our continued goals I faced we very against our While execution focus proud strategic

fourth key priorities quarter during key some for walk to the some I accomplishments our through strategic would XXXX. of like to take highlight this and opportunity of our

on progress growth relates initiatives, program offerings make BPC our recently new during our the and to organic our and quarter. continue programs it launched As solid we product to

access recent industry-leading First, agreement Flush on have into calls, we Guard a us provides that we licensing marketed will discussed Overflow overflow entered an Technology. recently toilet as announced to we be as technology, which

quarter, largest were at Show. XXXX placements new Guard including and and customers, line awarded several product the featuring in products the a During distributors America. of X commercial of exhibited sanitaryware large commercial we fourth at We Kitchen retail North the Bath Flush

bite KBIS won place Technology. Flush Guard competition Bites as highly with at Additionally, the a first industry XXXX coveted Design biggest FGI for innovation the at its

our Second, focus agreements landed grow month, XXXX, entered continue and U.K. several partners opportunity geographically customer the providing we channels. on on customer the distributor advantage product in these Europe, major our across take in Germany and markets excited with X these and and new entry both relationships coming awards vast to and on India, U.K., retail first expand potential in look our Indian new the are In agreements we the growth the the India to of to we with market. build with presence in years. our and initiatives last grow In these forward of partners with by Australia the horizon we to have penetration the into partners continue continuing the quarters U.K., we to into to India, Eastern We wholesale and in

large Program in Online execute Shower as including Shower of the XXX on Wall into an Program recently many and partner locations our our industry-leading retail XXXX Third, of large June rollout U.S. we a existing retailer. program the for that to awards, as Canadian continue Door announced commenced

KBIS show new products among Shower Wall Our Jetcoat hit were a the attendees.

up to the programs ramp year. into further these driving to expect new We in momentum continue XXXX,

in promotion for with third in-store partner the products not promotion, new look placed Guard sanitaryware did excited retailer carry we we coming of announced any the forward which growth groundwork to I'm successful years. with Technology. retailer, a Overflow during our a new that several Flush SKUs an following features continued previously new that sanitaryware this the this We to report lay with growth. large to the Fourth, quarter, U.S. future

Finally, our rapidly. cabinetry continues to business grow custom

Our kitchen Covered of at had end show to custom us and the XXX line positive has highest premium added dealer XXXX, we the average brand increasingly Covered large We strong the Bath margins XXXX dealers display the total Bridge contributing any that the confidence Covered during count enormously active momentum, Show gives while segments. and Kitchen at at bringing year. feedback cabinetry across XXX our product the received new Bridge our Bridge growth gross showcased that of to our all a

the that By leveraging business terms cabinetry launch anticipated custom soft also software are commitment of announce cabinetry an Isla We Porter, personalization, recently to with spring announced believe XXXX. new has its official custom AI launch in Isla kitchen pleased digital and our existing operations design. reach and heights kitchen of we on-prem our industry-leading products, infrastructure new will unmatched with to in convenience premium Porter an

progress initiatives, drive be excited which to we on of very key our years. coming above-market XXXX in our expect are the organic in by strategic our driver help a results should growth us improved growth We and

by The decision higher-margin year-over-year margin improvement strategy another operating gross is categories. our value strategic focus creation second strong driving focus of driven on margin on expansion. of reported efficiency our quarter to We and

of margin from the For reported XXXX full gross headwinds. XXX the despite XXXX, up basis XX.X%, revenue we year nearly points

net deployment. working cash in capital flow is levels. lower improved focus progress usage, third our meaningful capital free made reducing on our which and conversion debt during efficient and resulted Finally, We XXXX

investment main initiatives continue strategic and acquisition opportunities repayment we debt opportunities. priority, to has While organic for in been bolt-on evaluate our

and market As we improvement environment remains spending remodel uneven the growing growth industry modest initiatives. for repair the several demand excited home survey The we predicting forecasters XXXX, are by our XXXX. momentum in in in declines with

Perry programs strategy, on our can are progress in under as our launches BPC XXXX when we will confident detail, of more we new However, the recent above-market in our he and product discuss generate covers growth outlook XXXX. based

our extremely faced headwinds we has coming a strategic XXXX, continued in This I'm during our market of years. and focus the our objectives. XXXX While positioned for proud long-term the solid year continued success and on many in company team

turn will financials. over I it for our detailed more to that, Perry review With of a

Perry Lin

of up provide details our Revenue $XX some the year additional morning, Thank you, our quarter, on and it give in I a during by in Furniture compared XXXX million shower systems, liquidity sanitaryware, balance guidance. Dave, update continued an totaled wrap of and Bath with weakness good XXXX, by fourth everyone. year, to the driven end-market prior cabinetry. demand on and kitchen X.X% and sheet the full will decrease the market, growth quarter partially offset

lower last ticket to benefit to Looking million revenue trade-down at million $XX.X Bath programs quarter, order in results. Sanitaryware line. up fourth our by due during The macro during to and was from year Bath X.X% from year period. improved to fourth patterns Furniture the down furniture new beginning the business was $X.X headwinds continued are our the as be impacted quarter, $X.X million market products. prior revenue

we previously, in we demand and in mid-tier category the As improved hope incoming discussed trends see have better the offering launching product quarters. are to address a to current

million Shower our the building and main million is The remained recently trend system in category the year. quarter, program last first $X.X $X.X XX% was revenue up revenue, from momentum. steady, during shower launched

We continue to expect improved drive into to XXXX. trends program this new

year, primarily product $X.X of million the was $X.X to million customer continued increase quarter, our during year driven business strong launches. cabinetry in the last growth profit an and million kitchen first consists compared Gross was by of the last higher-margin to new from Other quarter, dealer revenue, up which XX.X% due $X during growth product. first

gross roughly As basis the XXX points XX.X%, a from up margin to result, year. profit improved prior

year gross our to margin margin strong with expect full our gross year be full during We XXXX. performance generated XXXX the consistent

Guard recently $X.X quarter, brought for investment increased growth to ongoing year million first expenses to to during Our custom Flush cabinetry the from including kitchen business expenses tied last and product spending new our launched initiative, marketing development operating due $X.X million opportunity. online the in Overflow up

GAAP $X quarter, during XX% was year. million income up from the last fourth million operating income $X.X of

partially operating quarter was nonrecurring expenses, adjusted to prior year. fourth the growth to fourth certain our increase million higher expense was operating The income operating in during ] tied the initiatives. by quarter. the income growth, gross during $X.X [ Adjusted X.X% a period was same profit last result margin of offset operating Excluding

was from year. $X.XX GAAP XXXX, or per last down the period net fourth during $X.X quarter same million modestly share income diluted of the

to our turning and sheet Now balance liquidity.

of letters the of $X and end at with fund liquidity our XX, quarter we At debt equivalents end. December XXXX, credit we million. believe liquidity million under total facilities, the had cash of million to was of availability more cash of cash million solid that of had quarter, sufficient growth total the a $XX.X our We and is initiatives. $X.X As company are in net than $XX.X Combined of credit. position

expectation that has to our Finally, momentum inventory XXXX return continues investment to market and turning in our gain flat end to to expect as growth growth guidance, we level are despite organic modestly. down normalized,

between addition, in initial we of BPC guidance expect to continue our $X.X excludes we this investment of range Please $X increase to of adjusted take the are million the adjusted guidance to $X.X $X.X growth strategy. provided XXXX the under million, income for in Based that an income providing operating revenue million to our and In items. income net opportunity the is for factor, advantage to and income of net $XXX basis operating range and certain million $XXX million nonrecurring to attractive note on on adjusted adjusted million.

remarks. portion the prepared now question-and-answer our ready completes call. Operator, our for we That are of

Operator

[Operator Company. Reuben Benchmark The from Instructions] comes question Garner first with Our

Reuben Garner

kind seems from to topline coming pretty least what a despite strong sluggish retail of a environment, front. the outlook So be perspective a continue at to this on year

Like what Can then geographies control the any within you've kind with way there are business next months? you is much your how And of pieces and your moving within you and end over market of new this got new outlook? XX about to customers. assumptions lot quantify a just new talk have

David Bruce

as advance for BPC mean, which talking as a And it's products highlighted to in a least time or strategy example, talked ability our recent right which R&R that lot at market to India. the about and our some market, channel of a with today being the newer of Yes, organically the flat we've about especially our mentioned, particularly down market businesses, question. how low what addition looking digits. the that, intent there's is the we at I expansions, see initially, does executing with in good that lot Yes, Thanks. an as forecasting -- as -- relate technological grow our And we've far the toilet. mid-single with now or we Europe market to as we in to newer been

the that's, was market our and of that. again, results to be outpace with prior go to of right? new starting in destocking, about on you moderating able incremental as down that estimated some us taking some we see opportunities. -- 'XX new saw we're or But talked give in that should if our impacted the that that will of expectation business with material -- share some new -- which programs, And is business we And execute, programs that based by having to of the sort which instituting the on we XXXX back that of end XXXX. impact don't We into any QX we

a those programs, balance timing flat our overall. it's sort see and of And our again, which programs of and the new So with have to started impact a we business new on to growth of market down in matter positively. the also that's execution slightly these organic face how between

Reuben Garner

can trended And then what you of was in in full sort the And embedded what 'XX? impact how about I talk expectation pricing of your or outlook has, for 'XX? guess, Great. pricing is Okay.

David Bruce

don't pricing a going We to Yes. be in impact made In that adjustments either material XXXX. were is XXXX, anticipate way.

a We're going being freight said, large has pricing ramped of keep an far that. know, costs. year. from emanated we bit a to freight in so eye portion this That XXXX up on As

there's into major estimates either our our point, that as and playing the play at a middle anticipate year. part even But price as elevate. don't the into things belief we no should Our through price are this of And outlook should that factor way. come of we won't guarantee to XXXX, cost way out go

Reuben Garner

right year. Okay. about And any terms of are And of public, your if of thinking came operating just viewed doing like I a I'm X-part of last new percentage the is part they're of think, looks how then level way? I when was first last math expenses. -- the the it year, kind a tough think investment of question a as one-time here question revenue? this your market. that you on that sustaining year I the that expenditures one-time in It -- correctly, Was of little spending a the year despite kind Am mid-teens. I about kind was bit that expenditures? there or permanent long-term maybe more we do your mean in second end of

like and back of years the last lower it point? Is of kind mid-XXs over the that last the trend Now going year. of drive investments something year it's in higher that at been you've and got? consistently that or you couple gross Or some margin sounds to more into this to kind grow will are focused on than

David Bruce

Yes, into. of I was what finished to on going just lead Yes. sort you

The ourselves that right and growth. OpEx per to can't know sort we fact -- can that where exactly you the is key investing So our necessarily you're but on a the we I today necessarily we're we've look cited have place our we percentage of for with well that correct. to infrastructure targeting impact we of And now. we're that we're particular when this majority business beyond muted in I'm We're is growth a XXX% number, margin right? the -- trying not expansion now, in. at to the And at scale give know the gross trying se we're not But you what that's do. prepare

call of sense, it prepping in sort want some we're that. So if ourselves that you for to

new directly Some for of Europe, toilet the into business marketing kitchen those digital opportunities, for into investments example, new to India, venture, innovation. expanding are expanding obviously tied new our

business, operating things between of slowly markets, we when we've to as you investing place, the that we the have between be right we will in won't but will of see business lot elasticity the of delve answer in the already be question a much will expenses we with commensurate expansion going marketing a So where there lot drop with to have OpEx it go because that. that into -- what that, believe can to geographical we're the we're have overall place comes new to -- all the of as related answer percentage infrastructure leverage lot are those in we is pretty and So those, that -- versus the we investment a that the that, scale right? now, the with

Perry Lin

Yes.

our are at The while increase over kind of Reuben, think, in currently endgame OpEx I and also to gross percentage. future. operating we looking are a margin think income OpEx, doing our reasonable is the I our spending. That's goal is what we drive -- the dollar, maintain

Operator

Greg from comes with Northland Securities. Gibas question next Our

Gregory Gibas

you I gross were said the If you margin seeing how do nice, in kind improved of do to the public Or points from Just the view you basis for Really here? margin I side. company's I margins. could opportunities see on that you're trend upside history, year-over-year. up those of maybe sustainable? primary as margins drivers And think XXX gross those improvement? you mean, highest wondering where follow What improved and kind of expect

David Bruce

question. a That's good Yes. Sure.

So margin yes, definitely number far that what as in the mentioned that is averaged in we'll able be XXXX, think for did posture QX. great our the we short a that sure we the not XXXX. we I QX have term, like release I'm gross as to a realistic margin anticipate -- sustainable in gross maintain I

lot However, highest-margin a the is our That's probably we've grow growth to Kitchens said, margins coming our we that is which do from we being have. a because highest emphasized expect business that example. categories, best to of continue higher-margin lot. our

mean, exhibition was reaction I phenomenal. our KBIS at expand. kitchen to continue to We the

there. cadence. about gross the margin margin a the us then new industry as a couple well. of as keep And as are And continues talked ordering shower lot for sanitaryware inventory business focus dollars, last the of as levels growing we've the dollars, Our key in shakeout over to far moderates We grow. years, adding products, as and

As contribute to come we to life, going the that's back well. to see that side as dollar

scale able term. So going business, improve we the and margin we'll be short the in long really forward as do to gross we that feel the

Gregory Gibas

I Great. dynamics. maybe Just seeing about maybe are -- address know than could Makes talked now, where you anticipated what you sense. I worsen, categories seeing, Cool. quarters you you I to improvements? you but exactly then several destocking wanted or longer some this those categories for And persist but follow are up. even wondering if or where guess,

David Bruce

briefly We material to local really this to material don't doesn't little But I minimal. results certain any be I certain business, normalized Yes. I destocking. mean it's from with at there's aspect pockets small industry. mean -- from mentioned. a think pretty destocking the see our year much said, to going just across it That being impact our categories. has customers The

think while normalized, difference on I think this upon at last inventory the quarter, also wholesale, a conservative more retail their year, I this looking touched levels level base and and I have they're inventory.

know just slightly I cautionary So forecasts their market, are as based on mentioned the flat that they down. to that's what earlier

So at looked be with scrutiny. a to more little their are inventory going levels

I go we something think everybody like And the don't spikes, in when and that. So through they that you're that going over 'XX. obviously, to XXXX see big saw frets

sort to from for what inventory being with an I that abnormality of little ordering little said, everybody most but more bit levels. is a -- bit But to conservative So to lower a the just there. be no going see we're perspective. It's part, believe there's going

year, into I we think that hear cadence. impact beginning and the into an not weren't the destocking the But middle you're was go key. this as us The as talk we yet of the going I people and the year headed of impacting order last as about business. head So to of the part was I into year, as -- think think we've middle destocking there

Gregory Gibas

Okay.

valuation follow in way of thinking Sounds your you or evaluating? to good. a make strategic commentary reasonably And attractive? are I guess up And on are opportunities. multiples lastly, sense What about types just do on or bolt-on opportunities

David Bruce

opportunities have question would good I bit of close didn't obviously, out got a then more, you it's are rough They uneven of of years for think very sort what inventory for more had we the It's came X.X across because engaging the couple flurry is. was the was when I today. year I call ourselves. quiet. look just value and going set it's what a desk. of X then yes, destocking of came little that a market. And again on I a there we our XXXX because at I people I some And sort to with look -- a ago, years Yes, with company rough you quiet conversations activity -- in We pan didn't it think, But multiples, gauge of a some at or that And got X. been historicals. and some meet think requirements a we to had to

So to our our add bolt-on I call, looking what that not think bath of kitchen, here our, are are is strength right? I would part categorical we dominance, that and is of for which outside companies opportunities

many of maybe to our different channel. at if -- that related the product a tied companies look we in, not quite same it's industry, related category, it's product, So are a in we might the

based judge the as bit I looking several make at in of more we'll Perry we experience last like the going to then, and So And we've able said, financials hopefully, little been move months. we're I decisions enough industry we be course, those reviewing think how forward. have I wise our think involved with on information a and to multiples,

So come hopefully, to will -- they'll something fruition.

Operator

would to to back our conference question-and-answer remarks. session. concludes any Dave like closing This for Bruce over I the turn

David Bruce

quarter, the We next the our speaking well. look for interest you. don't on your connect with appreciate of today. Thank FGI. you if quarterly call. time and continued to support forward Thank we And we Stay during you

Perry Lin

Thank you.

Operator

presentation. you The attending for Thank conference has now today's concluded.

disconnect. may now You

FGI Industries (FGI) 21 Mar 242023 Q4 Earnings call transcript