FGI INDUSTRIES ANNOUNCES FOURTH QUARTER AND FULL - YEAR 2023 RESULTS
PR Newswire
EAST HANOVER, N.J., March 20, 2024
EAST HANOVER, N.J., March 20, 2024 /PRNewswire/ -- FGI Industries Ltd. (Nasdaq: FGI) ("FGI" or the "Company"), a leading global supplier of kitchen and bath products, today announced results for the fourth quarter and full-year 2023.
FOURTH QUARTER 2023 HIGHLIGHTS
(As compared to the prior-year period)
-- Total revenues of $31.0 million, (2.6%)
-- Gross profit of $9.0 million, +20.1%; Gross margin of 29.2%, +549 basis
points
-- Net Income of $0.5 million
-- Adjusted net income of $0.5 million*
-- Adjusted operating income of $1.4 million*
FULL-YEAR 2023 HIGHLIGHTS
(As compared to the prior-year period)
-- Total revenues of $117.2 million, (27.5%)
-- Gross profit of $32.1 million, +1.8%; Gross margin of 27.4%, +788 basis
points
-- Net Income of $0.6 million
-- Adjusted net income of $1.0 million*
-- Adjusted operating income of $2.8 million*
* Adjusted net income and Adjusted operating income constitute non-GAAP
financial measures. Please see the attached appendix for details.
MANAGEMENT COMMENTARY
"While 2023 was a difficult year due to uneven demand trends and prolonged inventory de-stocking, we remained committed to executing on our strategic initiatives, and as a result, we finished the year on a positive note and are entering 2024 well positioned to deliver improved financial results," stated David Bruce, President and Chief Executive Officer of FGI. "We saw improved order trends during the fourth quarter, due in large part to the investments we made in organic growth initiatives throughout the year, and we expect the order momentum to continue to build into 2024."
"We experienced solid growth trends across most of our business portfolio during the fourth quarter owing to growing momentum from new programs, generally stable end market demand, and a normalization of inventory levels in the channel," noted Bruce. "Each of our business segments showed year-over-year growth during the fourth quarter, other than Bath Furniture, which continues to be impacted by demand weakness and a trade down to lower-priced offerings. Total revenue ended down 2.6% in the fourth quarter."
"Our continued strategic focus on higher margin products drove another quarter of strong gross margin improvement, with fourth quarter gross margin increasing 549 basis points to 29.2%, our highest quarterly gross margin as a public company," continued Bruce. "As a result, gross profit increased 20.1% during the fourth quarter to $9.0 million. I am very pleased by the improved momentum exiting the year, and it is very exciting to see our investments in our BPC initiatives begin to pay off."
"As we discussed on our first call as a public company almost exactly two years ago, we are committed to driving value creation for shareholders by executing on our long-term strategic plan, which is based on driving above market organic growth through a focus on our BPC (Brands, Products, Channels) strategy, enhanced margin performance, and efficient capital deployment," continued Bruce. "We remained focused on our strategic plan during 2023, despite what was a very challenging operating environment, and I am very proud of all we accomplished during the year. From a commercial perspective we made important progress on several key initiatives that will help us drive above-market growth in the coming years, including the launch of several new products and expanded penetration with key customer partners in Sanitaryware, the introduction of value-priced offerings in Bath Furniture to address shifts in market demand, continued growth in our shower business, and significant expansion in the dealer network for our custom kitchen cabinetry business. I could not be more pleased by our gross profit margin performance during 2023, as we increased our full year gross margin by 788 basis points, despite the revenue declines, owing to our strategic focus on growing our higher margin product categories. Finally, we continued our discipled focus on capital deployment, as we reduced working capital usage and ended the year in a very strong financial position that will provide us the financial flexibility to pursue our strategic objectives."
"We maintained our strict financial discipline during the quarter, resulting in a cash balance of nearly $7.8 million at the end of the fourth quarter, which combined with our borrowing capacity, resulted in total liquidity of $24.4 million," stated Perry Lin, Chief Financial Officer of FGI. "We continue to believe the highest and best use of our capital is for internal investment and this will remain our priority in the near-term; however, we will also continue to evaluate opportunities for strategic M&A."
"While inventory levels have largely normalized, the demand environment remains uneven, with several industry forecasters predicting modest declines in home improvement industry spending in 2024," continued Bruce. "However, based on the growing momentum in our new programs and product launches under our BPC program, we expect to generate above-market growth in 2024. As a result, we are forecasting full year 2024 revenues of $115 million to $128 million, adjusted operating income of $2.8 million to $3.8 million and adjusted net income of $1.2 million to $2.0 million. While we made significant progress against our strategic initiatives during 2023, we remain focused on our plan and look forward to continued execution against our strategy in 2024," concluded Bruce.
STRATEGIC UPDATE
FGI intends to drive long-term shareholder value through the execution of its Brands, Products and Channel (BPC) strategy to drive organic growth, enhanced financial performance, and efficient capital deployment. Some of the accomplishments achieved during the fourth quarter of 2023 and the key priorities for 2024 are as follows:
-- BPC Strategy: FGI has continued to invest in its BPC strategy despite the
market challenges, which is expected to drive improved organic growth
longer-term. Some of the key successes during the quarter were as
follows:
-- FGI recently announced it entered into a 5-year licensing
agreement that will provide the Company access to an industry
leading overflow toilet technology. The company will market this
technology as FlushGuard Overflow Technology. During the fourth
quarter, the Company was awarded product placements utilizing the
FlushGuard technology at several large customers, including two of
the largest commercial distributors in North America. FGI
exhibited a new line of retail and commercial sanitaryware
products featuring FlushGuard at the 2024 Kitchen & Bath Show.
-- FGI continues to focus on its initiatives to expand geographically,
with recently signed agreements providing entry into India,
Eastern Europe, Australia, and the UK. In the UK, FGI landed its
first new customer partners in 2023 and as recently as this past
month, three new distributor partners in India.
-- The Company continued to execute on recently announced awards,
including its online shower door program for an existing large
Canadian retail partner that commenced in June 2023, and the
roll-out of FGI's industry leading shower wall program into as
many as 300 locations of a large U.S. retailer. Both programs
continue to ramp up and contributed to improved shower systems
growth in the fourth quarter, and the programs are expected to
further build momentum into 2024.
-- During the third quarter, FGI announced it had initiated an
in-store promotion with a large US retailer that did not
previously carry any of the Company's sanitaryware products in an
effort to lay the groundwork for future growth. Following a
successful promotion, the Company was able to place several new
sanitaryware SKUs with this retailer, which feature the new
FlushGuard overflow technology.
-- The premium Covered Bridge kitchen cabinetry brand added 203 new
dealers during 2023, bringing the total active dealer count to 302
at the end of the year. FGI had a large display at the 2024
Kitchen & Bath show that showcased its Covered Bridge custom
kitchen cabinetry line.
-- Key priorities under the Company's BPC strategy for 2024 include
the continued execution under recently launched programs, further
expansion of sanitaryware products utilizing the new FlushGuard
overflow technology, the launch of new value-priced bath furniture
offerings to better address current market trends, new product
launches in shower systems, and the introduction of Isla Porter,
the Company's new digital custom kitchen cabinetry business.
-- Enhanced Margin Performance: FGI generated fourth quarter gross margin of
29.2%, up from 23.7% in the same period last year owing to the ongoing
mix shift to higher margin products. For the full year 2023, gross margin
was 27.4%, up nearly 800 basis points from the 19.5% gross margin
generated in the prior year. During 2024, FGI expects gross margin to
remain consistent with the 27-28% gross margin generated during fiscal
year 2023, with operating margin improvement driven by volume leverage.
-- Efficient Capital Deployment: FGI will continue to prioritize capital
deployment in support of organic growth opportunities, while continuing
to evaluate strategic M&A opportunities. With total liquidity of $24.4
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