FGI - Earnings call transcript Q2 2024

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Operator

Good morning, ladies and gentlemen, and welcome to the FGI Industries, Inc.

Second Quarter 2024 Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, August 8, 2024.

I would now like to turn the conference over to Jae Chung, Vice President of Investor Relations at FGI Industries. Please go ahead.

Jae Chung

you. Thank Industries' Results FGI Call. Second XXXX to Conference Quarter Welcome CEO, are and Leading today and David Lin. the call Perry President Bruce; Officer, Chief Financial detailing press market financial a after our yesterday results. issued and recent We operational release closed the

would and and to commentary company's outside may forward-looking of questions that their by call responses statements, conference the like which, to today's nature, I you include management's remind on are control. uncertain

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

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

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

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

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

David Bruce

Thank for our I our joining and share strategic our thank growth reflected investments and in across products you, BPC or organic channels, you we've our the initiatives today. pleased to made am everyone, brands, call Good strategy. Jae. quarter second results morning,

our to XXXX. of an growth in second flat the The prior total revenue XX.X%, profit forecasting compared points of growth year. of quarter, with FGI to Gross reported year-over-year basis remains Gross improved increase $XX.X the our industry of reflecting relatively compared a XX.X% in quarter minimal of X.X%. million margin overall increase representing was XXX million, XXXX. outlook to customers $X

second enterprise XXXX, extended closely to XXXX. results. of and remainder Freight have December some for times part due tracking than and impacted logistics industry-wide more of and rates quarter, second import SAP continued we to our delays, since prices This lead challenges. the our the doubled shipments quarter in our experienced transition software During are

second the half in shipments delayed the fulfill year. of to expect We the

half declined Flush year-over-year XXXX. of We the optimistic the in X% revenue quarter. remain about Sanitaryware second Guard in

towards shift business and Furniture to same programs Systems aligned are in revenue the the The trends. programs, Bath reporting Shower from continue offerings customer assortment year. design more that new our with excited XX% and are benefited lower-priced market our new of in compared pricing period an and We increase last segment about to

U.S. Bridge cabinetry, an AI-backed quarter, custom In joint custom revenue and driven relationship XX% our kitchen digital-only on-trend official its platform. the dealer Covered premium Isla for is strong to the venture community the Porter kitchen the establish aims by products stage Isla in increased customer sales launch. expansion with a via continued Porter, across setting designer digital with

holds Our India geographic plans of promise expansion and significant in growth. driving Europe

engaged in and new During a an partners the bath in the office opened showroom India burgeoning quarter, distribution market. in we

initiatives fuel organic strategic growth. for and FGI long-term and Our future objectives, our growth dedication in their XXXX progressing success are I the beyond. company above-market well positioning are to team expected our to for commend

to I'll a more it Perry that, review. financial With for over hand detailed

Perry Lin

will update I additional the by everyone. current followed begin quarter, on morning, details good and an by balance Dave, and you, Thank liquidity providing sheet. our on

guidance Finally, full XXXX. the conclude I for will year our

the quarter an of $XX.X revenue XXXX, increase X% of to second the totaled XXXX. For million, compared quarter second

and to mentioned, due SAP our FGI transition part in software delayed ocean freight shipments disruption. Dave As to experienced enterprise

the in to We shipment second of year. delayed the half fulfill expect

$X increase was profit million XX.X% higher-margin an driven of quarter, Gross our in by year-over-year, products. the

quarter in the to compared improved to XX.X% prior XX.X% in year. the margin gross Our

second half. some products We the in in expect margin lower-margin as gross fulfilled are delayed moderation shipment of the

cabinetry Guard, prior from initiatives, million Flush Canadian in Bridge Isla inflation including the spend wholesale increased our $X.X expenses year kitchen million to the marketing operating growth investment for business. our in due and and Porter, Our $X.X Covered to ongoing

expect recur certain not and as half the expense We decline the fourth will third in expense second to first year, the in the in of quarter. half operating

operating GAAP our the revenue quarter. initiative loss operating to income Higher million was largely higher investing due negative margin in was $X.X million the expenses growth and in from accounted down for the in as were gross year. prior quarter, overall freight the $X.X

$XX.X Moving growth believe to FGI fund sheet. quarter. of more the initiative. liquidity million end had is million our Total to which in liquidity, At the $XX.X prior slightly our sufficient balance the declined second quarter, total than from in we

leaving in range million income range in Please of to and range are $X.X income that operating $X.X note unchanged excludes million; net adjusted of to certain the $XXX operating guidance of $X.X items. to XXXX million; income for the income million We $X nonrecurring net the revenue the adjusted adjusted adjusted guidance million and million. with $XXX in

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

Operator

Your comes Instructions] question of first [Operator Garner from Benchmark. Reuben

Reuben Garner

happen? that the just quantify beneficial any on So one what that the forward? quick then enterprise And was? you Can switch. how may SAP be a impact to When comments going you did guys on

David Bruce

QX. SAP end implemented of We the Yes. at

Perry Lin

May. May,

David Bruce

to of official companies we some our like rollout, going import of shipments quarter. it's have over are Technically, new to and the We a as QX. our will business. -- very those But some fully there using that's are as absolutely us. for about system shipments sales, were the date. business domestic was and the spill hiccups were company, outdated it did our lost on many those a a bring direct at well into old, -- our not expect excited impact already seeing experienced that course, to the for of QX,, implementation We're do efficiencies to May X, rollout we're ERP benefits But going what and it's

Reuben Garner

take understand the little little bit entry have you Are signs heard guys big-box Any the level. there? risks moving destocks that? there's place, you categories any do you down Okay. a And where and I that been the How that a where weakening points is particularly then We've price particular? there's at in consumer, of of seeing inventory not been related been feel bit. in but in guys seen you a exactly channel. We've broader about consumer to couple just of

David Bruce

a great question. it's No, Sure.

I case. didn't that's think the We really it think year destocking issue, about and the this -- still I the an anticipate talking was on I QX mentioned as call.

think I went our year through most of year. we pain this last into going

I Our in inventory are backing I lot that only a bit half, program launches a and the position time. increased has for that because up of think we're last anticipated new mentioned second

talked us mentioned actually most before From far affected categories. kitchen destocking finally, show now, debuted category February, trade down as product and Furniture. the in and Bath at and implementing. effect, that a are that the in starting that's customers majority our the perspective, to newer, -- of position strategy I came so We a about we've we been think we've that customer But when now that we're I've it our in bath product we how taking good very was our the more lot with on of actually product. had I've mid-priced are as place a to And

from starting to improved the to half. as into order cadence Furniture it our Bath see customers And larger second a going bit relates little of we're

to think from actually here. we're the back see So your hit I We're -- opposite, going improvement seeing go exact of not seeing and only to to sort answer already the that. no, destocking I think we're we've question, floor,

Reuben Garner

Okay. of next kind I at we best you aside, R&R you Very of is that then it what yet? look on what Or remind our between terms year, customers? like? that. of take way to Any new still in of products, guess, new helpful. guess of that kind quantify market control And your Can within us an kind early idea can to have get too might

David Bruce

but -- quantify I'd we feel say, XXXX, a Reuben, Yes. I I good. be If could genius, I'd

Here's of feel really we -- about We right have actually for what we're talked into we're right in newer Furniture we're about the in business. that QX. launches on we let speak. QX a me items as the that program like the kitchen fact seeing say see good are Many turnaround. we -- now. We're momentum play in going We our teams now there are as the our We like Bath really sales to this. starting side, actionable

fastest is we've had steam program. its really many kitchen in years moving the full since Our ahead, probably business momentum

outside where programs lot but things excited I So imply our heading XXXX, right they're that into we're obviously, -- that customers now going of of issues, macro new which board, but coming We're executed. would of sort been that are about starting finally be think a these new on and monitor, to it's now. to have we -- discussion

outpace they business any As first as affect be next we're our those well. talk place in next the to issues macro would to expectation our early I things. optimistic new issues, let's see Again, opportunities. of But mean, very with year, how year about but now, cautiously it's the of about

Operator

next Your Greg Northland Gibas of comes from question Securities.

Gregory Gibas

that in of and positively the you Given, I a or maybe year. trying and takes guidance, sense guess, anything you surprised maintaining remainder negatively get of the on QX? for puts into to Just the expectations quarter reiterated

David Bruce

coming that have spoken heavily I idea this we expected. normally, our an our is about half sales in lot of of in about, then what OpEx. perspective, had year. half And weighted half a maintaining second of generally, an a Yes. we sort know expense as first to I think spike businesses you we from newer tend our mean sort second guidance our and on of We gives that the the our know

we too really So weren't surprised.

the some don't it degree. definitely mention not blip. spilling over. had I a we But the shown numbers. But the QX about -- we're QX worried a think not those in that of specifically. really really delays nervous short-term We it. some had about know impacted, would not could just better I And again, We're that's shipping did to mean have issues. probably we that impacted have SAP, we

I moving the why We of yes, expected. guidance. of kind that's sort as reiterated along we So mean, are

single something despite decline. -- going outpace lot a positives to one I our our don't we flat while, lot maybe of as And you as business which quite to macro like right, was of looking a for going is a that's to are is affect of much business it that's preached think R&R was it's we've us, But market, us going be about down feel single-digit incremental is the going issues, talking that to sales. rebound not peers much. hear or despite the not QX, new digits. in for because

about yes. So we're feeling good pretty and it,

completely go don't anything think through to question, at half your this seen I there back to So was unexpected that point. we've original first the

Gregory Gibas

and that And I relative to expect QX guess color what you improve whether that outlook I is curious, rates, you're maybe Great. then expect QX? guess, QX? with the in or saw impact regarding what you trending the guess, kind in of Just your I Do on Appreciate freight how, to similar you there. it seeing same. stay a in

David Bruce

was things Yes. is of We're game. couple a freight different situation ago not The off very the always business of wall, went sort guessing which unusual. that now. a Yes. lot was in years It when a

industry we're going definitely continued conversation rate in down. seeing come a mixed There's climbs. I when to to think they're the as

-- to the Some have some some early late been that saying of have talking of been insiders we've QX, XXXX. that industry been into saying QX

we're concerned. not So it. monitoring We're particularly

They be them how have freight. very landed lot margins. our customers Asia. to inventory mix to of to see our as handle look protect from cost to take affected ship a have a we product. -- We We'll our by be Again, directly higher their careful own we do starts

any have remote. much we'll the now, And we'll there, marketplace, as we be of have we're right? to be in too monitor we're always to sort competitive So and don't we always in costs. competitive, but of not So worry

I it's approach market see monitor, think a just where the to wait-and-see goes.

Gregory Gibas

outlook Got know past. about market. fair. Curious office that there. I you in Great. updated of on you the market That's open I And an the Indian saw talked kind penetrating it. the

in curious if next Just maybe that could and opportunity you market. that the address steps

David Bruce

Sure.

I distributors We've one. So initially key in of one key to markets. think I is secure some strategy secured some the calls, our already mentioned on

on invite opening fall. frame. of the And the the for and September/October showroom we of will date this in dealers office/showroom. with office, us builder be the ready close. us allows process to that because quite architects, designers, market see of the us the have showroom will have it in sort But was is launch should sometime to, and to distributors just see the the an the not time a of It's for X We India. first one a showroom and ready to time, did small company product. registering a which critical company, builders, and the the India the dealer begin yet, components ready there And our we It's primarily official those the but about key as our south north in

have us [ more to expect market. So get And into to our a lot that's we'll do we going we market and into more growth, more name get as before do we'll market. It's about really about that year speed going go year-end, talk the what next to help in. into that we're be out and launch. -- each to seed able we And maybe once ] the that, going is in detail particular that a little we'll

Operator

David at for I'll There closing no Bruce go comments. this further questions are call the over to Please ahead. time. hand

David Bruce

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

Operator

Ladies for call. and conference disconnect. Thank participation, and may today's your this gentlemen, concludes now you you

FGI Industries (FGI) 8 Aug 242024 Q2 Earnings call transcript