FGI Industries Ltd (FGI) 2023 Q3 法說會逐字稿

Good morning and welcome to the FGI Industries Inc third quarter 2023 earnings call. All participants will be in a listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Paul Bartolai, Managing Director, Vallum Advisors. Please go ahead.

早上好，歡迎參加 FGI Industries Inc 2023 年第三季財報電話會議。所有參與者將處於僅聽模式。 （操作員說明）請注意此事件正在被記錄。我現在想將會議轉交給 Vallum Advisors 董事總經理 Paul Bartolai。請繼續。

Thank you. Welcome to FGI Industries third quarter 2023 results conference call. Leading the call today are President and CEO, David Bruce; and Chief Financial Officer. Perry Lin. We issued a press release after the market closed yesterday detailing our recent operational and financial results. I would like to remind you that management's commentary responses to questions on today's conference call may include forward-looking statements, which by their nature are uncertain and outside of the company's control.

謝謝。歡迎參加 FGI Industries 2023 年第三季業績電話會議。今天主持會議的是總裁兼執行長 David Bruce；和財務長。佩里林.昨天收盤後，我們發布了一份新聞稿，詳細介紹了我們最近的營運和財務表現。我想提醒您，管理層對今天電話會議問題的評論回應可能包括前瞻性陳述，這些陳述本質上是不確定的，超出了公司的控制範圍。

Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest filings with the SEC. Additionally, please note that you can find reconciliations with historical non-GAAP financial measures in the press release issued yesterday and in the appendix of this presentation.

儘管這些前瞻性陳述是基於管理階層目前的預期和信念，但實際結果可能存在重大差異。有關可能導致實際結果不同的一些因素的討論，請參閱我們向 SEC 提交的最新文件中的風險因素部分。此外，請注意，您可以在昨天發布的新聞稿和本簡報的附錄中找到與歷史非公認會計準則財務指標的調整表。

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

今天的電話會議將首先由 David Bruce 進行績效評估和策略更新，然後由 Perry Lin 進行財務評估。在準備好的發言結束後，我們將開通您的提問專線。這樣，我就把電話轉給大衛。

Thanks, Paul. Good morning to everyone, and thanks for joining our call today. We are beginning to see some signs of normalization and inventory levels and order patterns in certain categories. However, inventory destocking continues to impact our results.

謝謝，保羅。大家早安，感謝您今天加入我們的電話會議。我們開始看到某些類別的庫存水準和訂單模式正常化的跡象。然而，庫存去庫存繼續影響我們的業績。

With the recent macro headwinds, prolonging the expected inventory recovery as well as impacting overall demand across our categories. While our top line results are facing challenges, we continued to see the benefits of our margin improvement initiatives during the third quarter with gross margin improving 530 basis points from last year.

由於最近的宏觀逆風，延長了預期的庫存恢復時間，並影響了我們各個類別的整體需求。儘管我們的營收業績面臨挑戰，但我們在第三季繼續看到了利潤率改善計畫的好處，毛利率比去年提高了 530 個基點。

As a result our gross profit declined only 3% during the quarter, despite the 22% drop in revenues. We could see some short-term variability in our gross margins as we invest in our growth initiatives and see a rebound in our pro channel and bath furniture business, but we believe our improved gross margin profile should be sustainable longer term, owing to our strategic focus on higher margin categories and improved operating scale.

因此，儘管收入下降了 22%，但我們的毛利在本季僅下降了 3%。隨著我們投資於成長計劃，我們的毛利率可能會出現一些短期波動，並且我們的專業管道和浴室家具業務會出現反彈，但我們相信，由於我們的策略，我們改善的毛利率狀況應該是可持續的。專注於利潤率較高的類別並改善經營規模。

As we have discussed in recent quarters, the industry-wide inventory correction that began in the back half of 2022 has persisted into 2023 with uneven demand in the R&R channel and macro uncertainty, adding another layer of pressure. This has caused many key industry players to take a very cautious stance on inventory levels with many participants looking to reduce inventories to levels below historical averages.

正如我們最近幾季所討論的，從2022年下半年開始的全產業庫存調整一直持續到2023年，R&R通路需求不平衡和宏觀不確定性又增加了一層壓力。這導致許多主要行業參與者對庫存水準採取非常謹慎的立場，許多參與者希望將庫存減少到歷史平均值以下。

This has prolonged the destocking headwinds, particularly in the program. In addition, our European business centered in Germany has faced pressure due to a combination of destocking headwinds along with macro-economic pressures in that country.

這延長了去庫存的阻力，尤其是在該計劃中。此外，由於去庫存逆風和該國宏觀經濟壓力，我們以德國為中心的歐洲業務也面臨壓力。

Despite these near-term headwinds, we remain bullish on the long-term outlook for our industry and FGI in particular, the median age of owner-occupied homes is roughly 40 years in the United States. Home equity levels remain high, and homeowners are staying for longer due to the high interest rates. All of this provides a favorable backdrop for long-term remodeling demand.

儘管有這些近期阻力，我們仍然看好我們行業的長期前景，特別是 FGI，美國自住房屋的中位數年齡約為 40 年。房屋淨值水準仍然很高，而且由於高利率，房主停留的時間更長。所有這些都為長期改造需求提供了有利的背景。

As a result, while market demand may be uneven in the near term, we remain focused on our brands, products and channel growth strategy, which we are confident will enable us to drive above market growth in the coming years. And we remain steadfast in our efforts to continue our strategic investment.

因此，雖然短期內市場需求可能不平衡，但我們仍然專注於我們的品牌、產品和通路成長策略，我們相信這些策略將使我們能夠在未來幾年推動高於市場的成長。我們將堅定不移地繼續我們的戰略投資。

Our confidence in our long-term value creation formula has not changed. As a reminder, our long-term strategic plan is focused on three key initiatives, which include driving organic growth using our BPC strategy, operational improvements and efficient capital deployment.

我們對長期價值創造公式的信心並沒有改變。提醒一下，我們的長期策略計畫專注於三項關鍵舉措，其中包括利用我們的 BPC 策略推動有機成長、營運改善和高效的資本部署。

I am very excited by the progress we made against the strategic initiatives during the third quarter, so I would like to walk through some of our key accomplishments. As it relates to our BPC program and our organic growth initiatives, we continue to execute on a recently awarded new programs. We were awarded an important expansion on our recent partnership, and we continued our geographic expansion during the quarter.

我對第三季我們在策略性舉措方面取得的進展感到非常興奮，因此我想介紹我們的一些關鍵成就。由於它與我們的 BPC 計劃和有機成長計劃相關，我們將繼續執行最近授予的新計劃。我們獲得了對最近合作夥伴關係的重要擴展，並且我們在本季度繼續進行地域擴張。

First, we are very excited to have extended our licensing agreement for an industry-leading overflow toilet technology into Canada. We look forward to launching new sanitaryware products utilizing this technology at the 2024 kitchen and bath shop.

首先，我們非常高興能夠將業界領先的溢流馬桶技術的授權協議擴展到加拿大。我們期待在2024廚衛店推出利用此技術的新衛浴產品。

Second, we continue to expand our geographic footprint, building on the recently signed agreements providing entry into India, Eastern Europe, Australia and the UK. During the third quarter, we initiated a partnership with our first distribution partner in India, while our products were approved for use in large commercial projects for a new national construction company partner.

其次，我們在最近簽署的進入印度、東歐、澳洲和英國的協議的基礎上，繼續擴大我們的地理足跡。第三季度，我們與印度的第一個分銷合作夥伴建立了合作夥伴關係，同時我們的產品被批准用於新的國家建築公司合作夥伴的大型商業項目。

Third, I'm excited to announce that we are unveiling an exciting collaboration with Vurtu.uk, a highly regarded bath distributor in the UK. Under this exclusive arrangement, FGI will be the sole supplier of sanitaryware, featuring a range of new toilets and sinks, including the company's innovative seamless technology toilet. Vurtu.uk will showcase FGI's products, unpopular e-commerce platforms such as Menno, Menno Homebase and B&Q. As well as extending this exceptional offering to their entire customer base.

第三，我很高興地宣布，我們即將與英國備受推崇的衛浴經銷商 Vurtu.uk 展開令人興奮的合作。根據這項獨家安排，FGI 將成為衛浴設備的獨家供應商，推出一系列新型馬桶和水槽，包括該公司創新的無縫技術馬桶。 Vurtu.uk將展示FGI的產品、Menno、Menno Homebase和B&Q等冷門電商平台。以及將這項卓越的產品擴展到整個客戶群。

Four, we won a significant award for new business with a major US retailer that has agreed to expand their in-store bath furniture assortment with FGI. Several new collections consisting of over 20 new bath furniture items will be added, featuring brand new and exciting finishes, styles and configurations that will roll into stores in the second quarter 2024.

第四，我們因與美國大型零售商的新業務而獲得了重要獎項，該零售商已同意與 FGI 擴大其店內浴室家具品種。將添加由 20 多種新浴室家具組成的多個新系列，具有全新且令人興奮的飾面、款式和配置，將於 2024 年第二季度進入商店。

Next FGI was awarded a new toilet program at a major national US wholesaler. This program will include unique product updates to current total offerings at this customer, while also adding the recently announced new overflow toilet to the program, we expect this program will begin shipping in Q1 2024.

接下來，FGI 獲得了美國一家大型全國批發商的新廁所計畫。該計劃將包括對該客戶當前總產品的獨特產品更新，同時還將最近宣布的新溢流馬桶添加到該計劃中，我們預計該計劃將於 2024 年第一季開始發貨。

And finally, our custom Cabinetry business continues to grow rapidly with our premium covered bridge brand added 93 new dealers thus far in 2023, bringing the total active dealer count to 198 at the end of the third quarter.

最後，我們的訂製櫥櫃業務持續快速成長，我們的優質廊橋品牌迄今在 2023 年新增了 93 家經銷商，第三季末活躍經銷商總數達到 198 家。

We also continue to make progress on our new digital custom kitchen cabinetry investment, which is expected to formally launch in early 2024. We plan to have a large display at the 2024 kitchen and bath show that showcases its covered bridge custom kitchen cabinetry. We are very excited by our progress on our strategic initiatives, and we remain confident that this will help us drive above-market organic growth as market conditions normalize.

我們也在新的數位客製化廚房櫥櫃投資方面繼續取得進展，預計將於 2024 年初正式啟動。我們計劃在 2024 年廚衛展上進行大型展示，展示其廊橋訂製廚房櫥櫃。我們對策略性舉措的進展感到非常興奮，我們仍然相信，隨著市場狀況正常化，這將有助於我們推動高於市場的有機成長。

The second focus of our value creation strategy as on operating efficiency and driving margin expansion. We are pleased to have once again reported another quarter of strong year-over-year gross margin improvement, driven in large part by our strategic decision to focus on higher-margin categories.

我們價值創造策略的第二個重點是營運效率和推動利潤率擴張。我們很高興再次報告毛利率又一個季度同比強勁增長，這在很大程度上是由於我們專注於利潤率較高類別的戰略決策所推動的。

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

最後，我們的第三個重點是有效的資本配置。最近幾個季度，我們在減少營運資金使用方面取得了有意義的進展，從而改善了自由現金流轉換並降低了淨債務水準。

This further bolstered our solid liquidity position and financial flexibility. While debt repayment and investment in organic initiatives has been our main priority, we continue to evaluate strategic bolt-on acquisition opportunities.

這進一步增強了我們堅實的流動性狀況和財務靈活性。雖然債務償還和有機計劃投資一直是我們的首要任務，但我們仍在繼續評估策略性補充收購機會。

The demand environment remains uneven, which is prolonging the destocking headwinds that have impacted our results over the last year, with several industry forecasters predicting mid to high single digit declines in home improvement industry spending in 2024.

需求環境仍然不平衡，這延長了去年影響我們業績的去庫存阻力，一些行業預測人士預測 2024 年家居裝修行業支出將出現中位數到高個位數的下降。

While we have faced had headwinds in our end markets, I'm proud of the continued progress we have achieved on our strategic growth initiatives, and we have several exciting programs that should contribute to improved growth opportunities in the coming quarters.

雖然我們在終端市場遇到了阻力，但我對我們在策略性成長計劃上取得的持續進展感到自豪，並且我們有幾個令人興奮的計劃，這些計劃將有助於改善未來幾個季度的成長機會。

We have indicated on previous calls that we plan to continue to invest in our business despite the recent market weakness. And we have, in fact, increased our investments during 2023 relative to our initial expectations, which we feel demonstrates our confidence in our growth opportunities.

我們在先前的電話會議中表示，儘管最近市場疲軟，但我們計劃繼續投資我們的業務。事實上，相對於我們最初的預期，我們在 2023 年增加了投資，我們認為這表明了我們對成長機會的信心。

However, the incremental growth investments, including a strategic investment we made with a major retail customer in Q3 that is expected to lay the groundwork for future growth opportunities has impacted our outlook for 2023. Softening consumer demand, coupled with continued destocking and investments for future growth have caused us to revise our full year outlook.

然而，增量成長投資，包括我們在第三季與一家主要零售客戶進行的策略性投資，預計將為未來的成長機會奠定基礎，影響了我們對2023 年的展望。消費者需求疲軟，加上持續去庫存和對未來的投資成長促使我們修改了全年展望。

As a result, we now expect full year 2023 revenues of $115 million to $120 million, adjusted operating income of $2 million to $2.8 million and adjusted net income of $1 million to 1.5 million. While we are disappointed by our recent revenue results, we are excited about our BPC growth initiatives. And we remain committed in our efforts to continue our strategic investments in this promising direction.

因此，我們現在預計 2023 年全年營收為 1.15 億至 1.2 億美元，調整後營業收入為 200 萬至 280 萬美元，調整後淨利為 100 萬至 150 萬美元。雖然我們對最近的收入結果感到失望，但我們對 BPC 成長計劃感到興奮。我們仍然致力於繼續朝著這個充滿希望的方向進行策略性投資。

We believe our execution of the BPC. strategy, coupled with our strategic investments, will allow us to outpace the negative market predictions and should enable FGI to drive organic growth in the coming year.

我們相信我們對 BPC 的執行。策略，加上我們的策略投資，將使我們超越負面的市場預測，並使 FGI 能夠在未來一年推動有機成長。

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

接下來，我會將其轉交給佩里，以對我們的財務狀況進行更詳細的審查。

Thank you, Dave, and good morning, everyone. I will provide some additional detail on the quarter. Given an update on our liquidity and balance sheet and wrap it up with our full year 2023 guidance.

謝謝戴夫，大家早安。我將提供有關本季的一些額外細節。我們更新了流動性和資產負債表，並以 2023 年全年指引作為總結。

Revenue totaled $29.9 million during the third quarter of 2023, a decrease of 22% compared to prior year due to continued inventory destocking, as well as some modest weakness in the broader home improvement market. We continue to see large customer take a cautious stance regarding inventory levels, given sluggish demand trends, which is prolonging the inventory correction.

2023 年第三季的收入總額為 2,990 萬美元，較上年同期下降 22%，原因是庫存持續去化，以及更廣泛的家居裝修市場略有疲軟。鑑於需求趨勢低迷，我們繼續看到大客戶對庫存水準持謹慎態度，這延長了庫存調整的時間。

Looking at our business line, sanitary ware revenue was $20.7 million during the third quarter, down from $25.5 million during the prior year period due to the destocking headwinds, particularly in the pro channel and the more muted demand trends.

看看我們的業務線，由於去庫存的不利因素，特別是在專業通路和需求趨勢更加疲弱的情況下，第三季衛浴收入為 2,070 萬美元，低於去年同期的 2,550 萬美元。

However, our sanitaryware revenue increased 10.2% sequentially from the second quarter of 2023. The second consecutive quarter of sequential revenue gains as to some customers are beginning to return to more normal order patterns and new customer programs are benefiting results.

然而，我們的衛浴收入較 2023 年第二季度環比增長了 10.2%。一些客戶的收入連續第二個季度連續增長，開始恢復到更正常的訂單模式，新的客戶計劃正在使業績受益。

Bad furniture revenue was $2.5 million during the third quarter, down from $5.6 million in the prior year period. The broader bath furniture market continue to be one of the product categories most impacted by the macro headwinds.

第三季不良家具收入為 250 萬美元，低於去年同期的 560 萬美元。更廣泛的浴室家具市場仍然是受宏觀不利因素影響最嚴重的產品類別之一。

Our product mix in bath furniture is more focused on higher end price point, which is causing additional challenges given the more pronounced weakness in the higher ticket item. As the result of a recent market change, we are expanding our product offering in the mid-tier category to better address current demand.

我們的浴室家具產品組合更注重高端價格點，鑑於高價產品的弱點更加明顯，這帶來了額外的挑戰。由於最近的市場變化，我們正在擴大中端類別的產品供應，以更好地滿足當前的需求。

Solar system revenue was $4.9 million during the third quarter, down from $5.4 million last year, but up 15% sequentially from the second quarter of 2023. Why on the shower business has experienced some modest inventory destocking.

第三季太陽能係統營收為 490 萬美元，低於去年的 540 萬美元，但比 2023 年第二季連續成長 15%。為什麼淋浴業務經歷了一些適度的庫存去庫存。

The main trend remains steady and recently launched programs are gaining momentum. These new programs include the online shower door program with a large Canadian retail as well as new shower wall system rollout at as many as 300 locations of a large US retailer. We continue to expand recently awarded new programs to drive improved trend in the back half of 2023 and into 2024.

主要趨勢保持穩定，最近推出的專案勢頭強勁。這些新計劃包括加拿大一家大型零售店的線上淋浴門計劃，以及美國一家大型零售商多達 300 個地點推出的新淋浴牆系統。我們繼續擴大最近授予的新計劃，以推動 2023 年下半年和 2024 年的趨勢改善。

Other revenue, which consists primarily of custom kitchen cabinetry business, was $1.7 million during the third quarter, down modestly from $2 million last year. Momentum in the business remains strong as we continue to add new data to the network and new kitchen cabinetry initiative we have discussed is on track for launch in early 2024.

第三季的其他收入（主要包括客製化廚房櫥櫃業務）為 170 萬美元，略低於去年的 200 萬美元。隨著我們繼續向網路添加新數據，我們討論的新廚房櫥櫃計劃預計將於 2024 年初推出，業務勢頭依然強勁。

Gross profit was $7.8 million during the third quarter, a decrease of only 2.6% compared to last year, due to a shift in revenue mix toward higher margin products lower logistic costs and the full benefit of pricing actions taken during 2022. As a result, gross margin improved to 26.2%, up 530 basis points from the prior year.

第三季毛利為 780 萬美元，與去年相比僅下降 2.6%，原因是收入結構轉向利潤率更高的產品、物流成本降低以及 2022 年採取的定價行動的全部效益。毛利率提高至26.2 %，較上年提高530個基點。

Our operating expense increased to $7.3 million during the third quarter, up from $6.4 million last year. As we continue to invest our growth initiatives, the higher operating expense of reflect marketing spending for the recent launch overflow toilet product line. Expense tied to new custom kitchen cabinetry, business development opportunity as a warehouse and a strategic investment, we sold a lot major retailer that Dave discussed.

第三季我們的營運費用從去年的 640 萬美元增加到 730 萬美元。隨著我們繼續投資我們的成長計劃，較高的營運費用反映了最近推出的溢流馬桶產品線的行銷支出。與新的客製化廚房櫥櫃、作為倉庫的業務發展機會和策略投資相關的費用，我們出售了戴夫討論過的許多主要零售商。

GAAP operating income was $480,000 during the third quarter, down from income of $1.7 million in the prior year. Excluding certain nonrecurring expenses, adjusted operating income was $600,000 during the third quarter. The decline in operating income was a result of the revenue decline and the continued investment in operating expenses tied to growth initiative, partially offset by the improved gross margin.

第三季 GAAP 營業收入為 48 萬美元，低於去年同期的 170 萬美元。不計某些非經常性費用，第三季調整後營業收入為 60 萬美元。營業收入下降是由於收入下降以及與成長計畫相關的營業費用的持續投資造成的，但毛利率的提高部分抵消了營業收入的下降。

As a result, adjusted operating margin was 2% during the third quarter, down from 4.5% in the same period last year. GAAP net income was $340,000 or $0.04 per diluted share during the third quarter of 2023 versus net income of $1.3 million or $0.13 per diluted share in the same period last year. Excluding certain nonrecurring items, adjusted net income of third quarter of 2023 was $0.4 million or $0.05 per diluted share.

因此，第三季調整後營業利益率為 2%，低於去年同期的 4.5%。 2023 年第三季的 GAAP 淨利潤為 34 萬美元，即稀釋後每股收益 0.04 美元，而去年同期淨利潤為 130 萬美元，即稀釋後每股收益 0.13 美元。不包括某些非經常性項目，2023 年第三季調整後淨利為 40 萬美元，即稀釋後每股收益 0.05 美元。

Now turning into the balance sheet and our liquidity as of September 30, 2023, the company had $5.4 million of cash and cash equivalents and total debt of $8 million. At the end of the quarter, we had a $15.6 million availability under our credit facility. Net of letters of credit, combined with cash, total liquidity was $20.9 million at quarter end. We believe we are in a good solid liquidity position that is more than sufficient to fund our growth initiatives.

現在轉到截至 2023 年 9 月 30 日的資產負債表和流動性，該公司擁有 540 萬美元的現金和現金等價物，總債務為 800 萬美元。截至本季末，我們的信貸安排下有 1,560 萬美元的可用資金。扣除信用狀和現金後，截至季末的流動資金總額為 2,090 萬美元。我們相信，我們的流動性狀況良好，足以為我們的成長計畫提供資金。

Finally, turning into guidance as [favor] detail. Our incremental growth investment, combined with the micro headwind that operationally, industrial volumes have lead us to lower our outlook for the full year. Our revised range call for revenue in the range of $115 million to $120 million, adjusted operating income in the range of $2 million to $2.8 million and adjusted net income of between $1 million to $1.5 billion.

最後，變成[喜歡]細節的指導。我們的增量成長投資，加上營運和工業量方面的微逆風，導致我們降低了全年預期。我們修訂後的範圍要求收入在 1.15 億美元至 1.2 億美元之間，調整後的營業收入在 200 萬美元至 280 萬美元之間，調整後的淨利潤在 100 萬美元至 15 億美元之間。

Please note that the guidance for net income and operating income is being provided on an adjusted basis and excludes certain nonrecurring items. In addition, our guidance includes approximately half of median in this means for our new kitchen cabinetry initiated incremental marketing spend for our new overflow toilet technology opening.

請注意，淨收入和營業收入的指導是在調整後的基礎上提供的，不包括某些非經常性項目。此外，我們的指導包括大約中位數的一半，這意味著我們的新廚房櫥櫃為我們新的溢流廁所技術的啟用而啟動了增量行銷支出。

As awareness increased investment during the third quarter in support of a major retail customer that we expect to lead to attractive incremental growth opportunity in the incoming quarters.

隨著第三季支持主要零售客戶的意識增加，我們預計這將在未來幾季帶來有吸引力的增量成長機會。

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

我們準備好的發言就到此結束了。接線員，我們現在已準備好進行通話的問答部分。

Thank you. We will now begin our question and answer session. (Operator Instructions)

謝謝。我們現在開始問答環節。 （操作員說明）

Reuben Garner from Benchmark.

來自 Benchmark 的魯本·加納 (Reuben Garner)。

Thank you. Good morning, everyone.

謝謝。大家，早安。

Good morning Reuben.

早安，魯本。

Good morning Reuben.

早安，魯本。

Maybe, let's start with the what you're seeing and hearing from your customers. So it sounds like it may be a little bit conflicting. There still some destocking going on, but some customers are showing signs of returning to normal order patterns. Can you kind of talk us through that a little more detail as it dependent on the channel, is it depend on the product, what are you seeing there?

也許，讓我們從您從客戶那裡看到和聽到的內容開始。所以聽起來可能有點矛盾。仍在進行一些去庫存，但一些客戶顯示出恢復正常訂單模式的跡象。您能否告訴我們更多細節，因為它取決於管道，是否取決於產品，您在那裡看到了什麼？

Yeah, now it's a great question, Reuben. And yes. So as you know, we have a relatively broad product base within each of our categories, and we have a broad category offering. So I think we mentioned the inventory moderation, or the moderation of inventory destocking is uneven for us. In many cases, I think we've highlighted that bath furniture in particular has been more of us.

是的，現在這是一個很好的問題，魯本。是的。如您所知，我們在每個類別中都擁有相對廣泛的產品基礎，並且我們提供廣泛的類別。所以我認為我們提到的庫存控制，或者庫存去庫存的控制對我們來說是不平衡的。在很多情況下，我認為我們已經強調了浴室家具尤其是我們更多的人。

As soon as bath in the sense that we have such a broad assortment of cabinetry and cabinetry has been a little bit more affected due to our high-end assortment. So many of our customers are shifting with us. We're reengineering a lot of those assortments and it's taking longer. If you look at shower and sanitaryware, as Perry mentioned, we're starting to see sequential quarterly growth. Those inventory levels are moderating, but it also is impacted due to the fact that we have broad assortments within those categories.

從某種意義上說，我們擁有如此廣泛的櫥櫃品種，而由於我們的高端品種，櫥櫃受到的影響更大一些。我們的許多客戶正在與我們一起轉變。我們正在重新設計許多這類產品，而且需要更長的時間。如果你看看淋浴和衛生潔具，正如佩里所提到的，我們開始看到連續的季度成長。這些庫存水準正在放緩，但由於我們在這些類別中擁有廣泛的品種，庫存水準也受到了影響。

So we're confident going into as we exit Q4 into next year that we would fully expect to see a more improved order cadence getting back to more normalized levels that we were used to prior to. These destocking issues.

因此，我們有信心進入明年第四季度，我們完全期望看到訂單節奏得到更好的改善，回到我們之前習慣的更正常的水平。這些去庫存問題。

Okay. And it seems like there are three buckets of items that impacted this year's results. I was hoping you could quantify them for me. So we can try to kind of [parsed] what's not going to be negatively impacting next year.

好的。似乎有三類項目影響了今年的業績。我希望你能為我量化它們。因此，我們可以嘗試[解析]明年不會產生負面影響的事情。

So you had the destocking piece. You had investments tied future revenue opportunities that you didn't realize in 2023. So a cost element, and then the potential benefits of those investments that didn't come this year but will come next year. Can you kind of walk us through those three buckets with maybe some numbers behind it?

所以你有了去庫存的部分。你的投資與未來的收入機會掛鉤，但你在 2023 年沒有意識到。因此，成本要素，然後是這些投資的潛在收益，這些收益今年沒有實現，但明年就會實現。您能否向我們介紹這三個桶，背後可能有一些數字？

Sure. Well, I'm not going to get into very specific numbers, but I can tell you that, our feeling about entering 2024 is that -- the many not all -- of those first of all, the investments that we made in 2023 are not just for 2024, there for 2024 and beyond. But we will start to realize return on many of those investments in 2024.

當然。好吧，我不會透露非常具體的數字，但我可以告訴你，我們對進入 2024 年的感覺是——很多不是全部——首先，我們在 2023 年所做的投資是不僅是2024 年，還有2024 年及以後。但我們將在 2024 年開始實現其中許多投資的回報。

We've talked about our digital kitchen venture, which is going to launch in Q1, we've discussed our new toilet technology, which is going to be launched at our [KD show] in February. And you know, going back to the inventory situation that you mentioned that we were talking about destocking. We sort of feel there's going to be almost a natural organic (technical difficulty)

我們討論了我們的數位廚房項目，該項目將於第一季度推出，我們討論了我們的新廁所技術，該技術將於二月在我們的 [KD 展] 上推出。你知道，回到你提到的庫存情況，我們正在談論去庫存。我們感覺幾乎是天然有機的（技術難度）

A pardon me. This is the conference operator part. We've lost audio from our main presenting location. Please standby, Mr. Bruce, do you there?

原諒我吧。這是會議操作員部分。我們的主要演示地點丟失了音頻。請稍候，布魯斯先生，你在嗎？

Yes. --

是的。 --

Okay. Your line seems to be cutting out a little bit there. Please proceed.

好的。你的台詞似乎在那裡被切斷了一點。請繼續。

Okay. Hello, everybody is still there.

好的。你好，大家都還在。

I am here you cut off kind of early in the answer. So if you wouldn't mind so.

我在這裡，你在回答中很早就打斷了。所以如果你不介意的話。

I apologize. We must have a technical issue. So yes, we fully expect going into next year that we're going to see a couple of things. So regarding the investments, the investments in 2023, our obviously not just for next year there for next year and beyond.

我道歉。我們一定有技術問題。所以，是的，我們完全預計明年我們會看到一些事情。因此，關於投資，2023 年的投資，我們顯然不只是明年的投資，還有明年及以後的投資。

And then from an inventory perspective, we -- as I sort of mentioned, we would expect to start to see more normal order cadence as we enter 2024 and that's going to be sort of almost a natural organic growth opportunity for us just to get back to more normal cadence, as I mentioned, we've seen sequential quarterly growth quarter-over-quarter in the sanitaryware and in the shower already.

然後從庫存角度來看，正如我所提到的，進入 2024 年，我們預計將開始看到更正常的訂單節奏，這對我們來說幾乎是一個自然的有機增長機會正如我所提到的，按照更正常的節奏，我們已經看到衛生潔具和淋浴產品的季度環比連續增長。

And again, we've mentioned new opportunities that are going to be incremental despite where market predictions are right now. And as we I think we mentioned in the release, the R&R market is by many industry insiders predicted to be down mid to possibly high-single digits. But our incremental new programs that we're discussing are new kitchen opportunities, the continued growth of the covered bridge business, our shower expansions, we would fully expect to be able to outpace any negative market momentum in 2024.

我們再次提到，儘管目前的市場預測是這樣的，但新的機會將會不斷增加。正如我們在新聞稿中提到的那樣，許多業內人士預測 R&R 市場將下降到中位數或高個位數。但我們正在討論的增量新計劃包括新的廚房機會、廊橋業務的持續增長、淋浴間的擴建，我們完全期望能夠在 2024 年超越任何負面的市場勢頭。

Okay. And in that kind of backdrop where maybe market's down mid-single digits or more, you guys are maybe down less than that. Like what how do we think about what margins look like for next year? I know it's early and you're not giving guidance, but what are kind of the puts and takes, we have to think about when we're trying to put that together.

好的。在這種背景下，市場可能會下跌中個位數或更多，而你們的跌幅可能會小於這個數字。例如我們如何看待明年的利潤率？我知道現在還為時過早，您也沒有提供指導，但是看跌期權和索取期權是什麼樣的，我們在嘗試將其放在一起時必須考慮。

I know it's a great question, and we're pretty excited about it, actually. If you go back to when we first went with the IPO, a couple of years ago, we talked about our goal is to get our margins to in the near to midterm to in the range of between 25% and 30%. We're already above 25% now and a lot of the opportunities we've mentioned not only this quarter, but in previous quarters, our focused on the higher margin businesses.

我知道這是一個很好的問題，實際上我們對此感到非常興奮。如果你回到幾年前我們第一次進行 IPO 的時候，我們談到我們的目標是在近期到中期將我們的利潤率提高到 25% 到 30% 之間。我們現在已經超過 25%，我們不僅在本季度提到了許多機會，而且在前幾個季度也提到了我們專注於利潤率較高的業務。

So there was a kitchen is starting to scale itself to a degree that is having a larger impact now in our margins. And we're investing like we spoke about in technologies and businesses such as our shower and the digital kitchen business, which is higher margin.

因此，廚房開始擴大規模，對我們的利潤產生了更大的影響。正如我們所說，我們正在投資技術和業務，例如我們的淋浴和數位廚房業務，這些業務的利潤率更高。

So at the same time, as some of our Pro business may come back and some more mid-price vanity business. We may see some of that gross profit percentage to have some dips here and there, but that's going to contribute to larger gross margin dollar growth, which will impact our EBIT targets, which you know, again, we've discussed getting our EBIT margins into the mid to high single digits, and we would fully expect with the combination of the higher margin categories along with the margin dollar growth that we're on our way to those goals as we had previously discussed.

因此，與此同時，我們的一些專業業務和一些中等價格的虛榮業務可能會回來。我們可能會看到其中一些毛利百分比會有所下降，但這將有助於毛利率的更大增長，這將影響我們的息稅前利潤目標，你知道，我們已經討論過如何獲得息稅前利潤率進入中高個位數，我們完全期望透過較高利潤率類別與利潤率美元成長的結合，我們正在實現我們之前討論的這些目標。

And just to be clear, I mean, those mid to high single digits, is there a certain revenue level need to get there a volume level or can you do it kind of in that flattish to down revenue environment potentially next year?

需要澄清的是，我的意思是，那些中高個位數的收入水平是否需要達到一定的收入水平才能達到一定的銷量水平，或者你能在明年可能出現的收入持平甚至下降的環境中做到這一點嗎？

Reuben, this is Perry. I think you know, it's a mix to us because we are working on the volume, we are working on the margin, in different product category and channels, but our go because our -- you know scale, so the more gross margin dollars that we can generate, the higher operating margin that we can see in the bottom.

魯本，這是佩里。我想你知道，這對我們來說是一個混合體，因為我們正在努力提高銷量，我們正在努力提高利潤，在不同的產品類別和通路中，但我們這樣做是因為我們——你知道規模，所以毛利率越高我們可以產生更高的營業利潤率，我們可以在底部看到。

Okay. Thanks, guys. Good luck with the rest of the year.

好的。多謝你們。祝今年剩下的時間一切順利。

Thank you.

謝謝。

Thank you.

謝謝。

(Operator Instructions) Greg Gibas from Northland Securities.

（操作員指令）來自 Northland Securities 的 Greg Gibas。

Big Morning, David, Perry. Thanks, for taking my question.

早安，大衛，佩里。謝謝你回答我的問題。

(multiple speakers) Good morning, Greg.

（多個發言者）早上好，格雷格。

It seems like assuming a little bit of a recovery in Q4 implying guidance and just wanted to get a sense of maybe your underlying assumptions there and how destocking trends have continued into Q4?

似乎假設第四季度會出現一點復甦，這意味著指導，只是想了解您的基本假設以及去庫存趨勢如何持續到第四季度？

Well, you can make some inferences based on our guidance and what you saw in the first three quarters that we would hope to expect to your point a little bit of recovery. We've had I think we've mentioned last quarter that we're going to start -- we've started to see some new orders come in for some of those new programs we discussed. The majority will come next year, but some have trickled in, as we would -- as we had mentioned.

好吧，您可以根據我們的指導和您在前三個季度看到的情況做出一些推論，我們希望您的觀點有所復甦。我想我們上個季度已經提到我們將開始——我們已經開始看到我們討論的一些新項目收到了一些新訂單。大多數人將於明年到來，但有些人已經慢慢加入，正如我們所提到的。

Continued moderation of inventory destocking, I don't think I think what we won't see, which we've historically seen is larger orders in the end of Q4 in preparation for. As you know, we source 75% of our product is outsourced over in Asia and do the Asian holidays the beginning of the year.

庫存去庫存的持續放緩，我認為我們不會看到什麼，我們歷史上看到的是在第四季末準備更大的訂單。如您所知，我們 75% 的產品是在亞洲外包的，並在年初過亞洲假期。

We historically have had a larger spike in December. We don't think we'll see as large a spike as we used to, but that is still remains to be seen, depending upon again where those inventory levels are and also where the end markets go and where the macro levels go.

從歷史上看，我們在 12 月曾出現過較大的高峰。我們認為我們不會看到像以前那樣大幅的飆升，但這仍有待觀察，這再次取決於庫存水平、終端市場的走向以及宏觀水平的走向。

So I think if you just want to -- you could make your inferences based on our new guidance, and the cube, but as we've entered Q4, I could say that we feel pretty good about what we're seeing. But we've still got some time to go.

所以我認為，如果你只是想——你可以根據我們的新指導和立方體做出推論，但隨著我們進入第四季度，我可以說我們對所看到的情況感覺非常好。但我們還有一些時間。

Got it. Makes sense. And then curious like if you're seeing any movement on pricing or margin pressures. I mean, it looks like gross margins are still holding up pretty well and just a little surprised that as a result of the lower inventory levels are basically destocking reducing demand levels. I'm just a little surprised that we didn't really see much movement on margins as a result?

知道了。說得通。然後好奇你是否看到定價或利潤壓力有任何變化。我的意思是，看起來毛利率仍然保持得很好，只是有點驚訝的是，由於庫存水平較低，基本上是在去庫存，從而降低了需求水平。我只是有點驚訝，結果我們並沒有真正看到利潤率有太大變化？

Yes. Well, we've been pretty strategic about that, and we have made some adjustments where necessary in regards to price, but most of that focus. I'll I hate to go back to this constantly, but a lot of that focus has been on our bath furniture side.

是的。嗯，我們對此非常有策略，我們在價格方面做了一些必要的調整，但大部分都是重點。我不想經常回到這個話題，但很多注意力都集中在我們的浴室家具方面。

That bath furniture assortment that we've had of the market has is probably the most broad product category that we have from a scale perspective and a collection perspective and our partners -- our retail partners and wholesale partners are really trying to rightsize that business.

從規模角度和系列角度來看，我們市場上的浴室家具品種可能是我們擁有的最廣泛的產品類別，我們的合作夥伴——我們的零售合作夥伴和批發合作夥伴正在真正努力調整業務規模。

There were so many offerings out in the marketplace and then when inventory became an issue and then price, at certain point, I think Perry mentioned most of our assortments had been focused on the higher end. Again, we ran the gamut from good-better-best, but it was mostly focused on the best.

市場上有如此多的產品，然後當庫存成為一個問題，然後價格成為一個問題時，在某種程度上，我認為佩里提到我們的大部分品種都集中在高端。同樣，我們涵蓋了從“好”到“更好”到“最好”的所有範圍，但主要關注的是最好的。

So we're rightsizing a lot of those programs. I think, I mentioned one of our big retail customers just we've won a big award there to add new collections going into next year. That's part of that strategy. So while that's happened, we've been expanding a higher margin business, the shower business, the kitchens, like I said, are starting to scale to a size where it's having more impact to our overall margin in our assortments.

因此，我們正在調整其中許多計劃的規模。我想，我提到了我們的一個大零售客戶，我們在那裡贏得了一個大獎，以增加明年的新系列。這是該戰略的一部分。因此，在這種情況發生的同時，我們一直在擴大利潤率更高的業務，淋浴業務、廚房，就像我說的那樣，開始擴大規模，對我們品種的整體利潤產生更大的影響。

And that's going to continue. We absolutely expect that to continue as we enter next year. So that's part of the reason why the margins have held up well, I think our teams have done a fantastic job helping our customers (technical difficulty)

這種情況還會持續下去。我們絕對希望這種情況在進入明年時能夠繼續下去。所以這就是為什麼利潤率保持良好的部分原因，我認為我們的團隊在幫助我們的客戶方面做得非常出色（技術難度）

Ladies and gentlemen, once again, we have a little bit of an audio loss there. Mr. Bruce, we just lost you.

女士們先生們，我們再次遇到了一點音頻損失。布魯斯先生，我們剛剛失去了你。

I think we're back now, please proceed.

我想我們現在回來了，請繼續。

Okay. Greg, I apologize.

好的。格雷格，我道歉。

The digital problem I think we've kind of got the full answer out. I think you're just kind of summarizing at the end. But very helpful and it makes little sense. Lastly, curiously I know it's still early, but if you could discuss the opportunity in India, great to see that you initiated your first distributor partnership there. How should we think about maybe the rollout in that market, how you're thinking about expanding into it?

我認為我們已經找到了數字問題的完整答案。我認為你只是在最後總結一下。但非常有幫助，而且沒有什麼意義。最後，奇怪的是，我知道現在還為時過早，但如果您能討論在印度的機會，很高興看到您在那裡啟動了第一個經銷商合作夥伴關係。我們應該如何考慮在該市場的推出，您如何考慮擴展到該市場？

Yes. So our initial foray into India is going be focused primarily on our sanitaryware business, there's a large opportunity. You could only imagine. I mean, obviously, it's one of the largest markets in the world. Sanitaryware is a growing category there with a lot of expansion there some local municipal and national government incentive similar to what the United States had done with low-flow toilets. For example, when there were rebates given to convert from higher flow.

是的。因此，我們最初進軍印度的主要重點是我們的衛浴業務，這是一個很大的機會。你只能想像。我的意思是，顯然，它是世界上最大的市場之一。衛浴潔具是一個不斷增長的類別，在一些地方市和國家政府的激勵措施下進行了大量擴張，類似於美國對低流量廁所所做的事情。例如，當從較高流量轉換時給予回扣。

So that's our main focus, and we're looking at it right now is sort of a two-pronged for we're partnering, as we mentioned, with a very formidable distributor that will take our products into the market into showrooms and local, I'll call it local building opportunities and some hospitality opportunities.

所以這是我們的主要焦點，我們現在正在考慮的是雙管齊下，因為正如我們所提到的，我們正在與一個非常強大的經銷商合作，它將把我們的產品推向市場，進入展廳和當地，我稱之為本地建築機會和一些接待機會。

At the same time, we're aligning ourselves with least initially so far larger construction company that is speccing our product and has approved our product for spec to expand into larger commercial projects such as airports, new apartment buildings, larger hotels, national program.

同時，我們正在與至少迄今為止規模較大的建築公司結盟，該公司正在設計我們的產品，並已批准我們的產品規格擴展到更大的商業項目，如機場、新公寓大樓、更大的酒店、國家計劃。

So there's a lot of leg work still to do, but we've made those initial. We've broken down those initial barrier, so to speak. And we have upcoming meetings in Q4 with our distributor to set the plans in place to execute this program and as we enter next year. So we're excited about it.

因此，還有很多工作要做，但我們已經初步完成了這些工作。可以說，我們已經打破了這些最初的障礙。我們即將在第四季度與我們的經銷商舉行會議，以製定執行該計劃的計劃，並在進入明年時進行。所以我們對此感到興奮。

Got it. Thanks for the color.

知道了。謝謝你的顏色。

Yep, No problem.

是的，沒問題。

And ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to David Bruce for any closing remarks.

女士們、先生們，我們的問答環節到此結束。我想將會議轉回給大衛布魯斯發表閉幕詞。

Thank you for the time and interest today. We appreciate your continued support of FGI. Please note that we will be attending the Benchmark Discovery Conference on December seventh and stay well. And if we don't connect during the quarter. We look forward to speaking with you on our next quarterly call.

感謝您今天的時間和興趣。我們感謝您對 FGI 的持續支持。請注意，我們將參加 12 月 7 日舉行的基準發現會議，祝一切順利。如果我們在本季沒有聯繫。我們期待在下一次季度電話會議上與您交談。

Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

謝謝你，先生。會議現已結束。感謝您參加今天的演講。您現在可以斷開連線。